Rising construction costs, lower mortgage rates keep builder confidence steady

"While builders continue to contend with rising construction costs, a recent drop in mortgage interest rates over the past month should help spur housing demand, Buddy Hughes, the NAHB chairman, said in a statement. As builders look to improve buyer traffic and offload inventory in September, 39% of them turned to price cuts, up from 37% in August, marking the highest percentage post-Covid. The average price cut made by these builders remained at 5%, where it has been since November of 2024."

"In addition to price cuts, builders are also using sales incentives to drive traffic to their properties, with 65% of builders reporting that they are using sales incentives in September, nearly unchanged from the 66% recorded in August. In addition, the NAHB reported that homebuilders' gauge of current sales conditions held steady at 34. The gauge measuring traffic of prospective buyers posted a one-point decline to a reading of 21, while the component charting sales expectations over the next six months rose two points to 45."

"NAHB expects the Fed to cut the federal funds rate at their meeting this week, which will help lower interest rates for builder and developer loans, Robert Dietz, the chief economist of the NAHB, said in a statement. Moreover, the 30-year fixed rate mortgage average is down 23 basis points over the past four weeks to 6.35%, per Freddie Mac. This is the lowest level since mid-October of last year and a positive sign for future housing demand."

Builders face rising construction costs while mortgage rates have recently fallen, which should boost housing demand. In September, 39% of builders implemented price cuts, up from 37% in August and the highest post-Covid; average cuts remain at 5% since November 2024. About 65% of builders used sales incentives in September, nearly unchanged from August. NAHB's current sales gauge stood at 34, buyer traffic slipped one point to 21, and six-month sales expectations rose to 45. The 30-year fixed mortgage average fell 23 basis points to 6.35%, the lowest since mid-October, and regional readings showed modest variation.

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