Rising construction costs, lower mortgage rates keep builder confidence steady

Homebuilder confidence held steady in September as mortgage rates begin inching lower in anticipation of an interest rate cut by the Federal Reserve later this week .

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) came in at a reading of 32 in September, the same as a month prior, according to data released Tuesday.

The index has hovered between 32 and 34 since May of this year.

“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.”

Regionally, the three-month moving averages held steady in both the Northeast (44) and the South (29), while the Midwest (42) and West (26) both posted single point increases.