The National
Association of Homebuilders (NAHB) reported on Tuesday its housing market index
(HMI) increased to 41 in September
from an unrevised August reading of 39. This marked the first rise
in builder confidence in five months.
Economists had predicted the HMI to increase to
40.
A reading over
50 indicates more builders view conditions as good than poor.
All three major
HMI components posted gains in early September. The
component charting sales expectations in the next six months jumped 4 points to
53, while the component measuring traffic of prospective buyers climbed by two
points to 27, and the component tracking current sales conditions went up 1
point to 45. Meanwhile,
Commenting on
the latest report, NAHB Chairman Carl Harris said that thanks to lower interest
rates, builders now have a positive view for future new home sales for the
first time since May 2024. “However, the cost of construction remains elevated
relative to household budgets, holding back some enthusiasm for current housing
market conditions,” he added, warning that builders will face competition from
rising existing home inventory in many markets as the mortgage rate lock-in
effect softens with lower mortgage rates.
Meanwhile, NAHB
Chief Economist Robert Dietz noted that with inflation moderating, the Federal
Reserve is expected to begin a cycle of monetary policy easing this week, which
will produce downward pressure on mortgage interest rates and also lower the
interest rates on land development and home construction business loans. “Lowering
the cost of construction is critical to confront persistent challenges for
housing affordability,” he added.