Home Builder Confidence Rebounds from 5-Year Low in October

Home builders less pessimistic

The supply of inexpensive for-sale housing, and lack thereof, is perhaps the biggest detriment to home buyers today.

Due to its cascading effect, the inventory scarcity drives up competition and then, prices. But could help be on the way?

A leading indicator of housing inventory bounced back in October from depressed levels in September.

Home builder confidence remains low

Home builder sentiment ebbs and flows based on consumer demand, market conditions, shifting costs and supply chain status.

Every month, the National Association of Home Builders (NAHB) and Wells Fargo survey NAHB members to measure this sentiment on a 0-100 scale in their Housing Market Index (HMI) report. The survey comprises three components for single-family housing: current home sales, home sales over the next six months, and traffic of prospective buyers.

In October, builder confidence rose at a score of 37 from the five-year low of 32 in September August while trailing October 2024’s 43.

“The 30-year fixed-rate mortgage fell from just above 6.5% at the start of September to 6.3% in early October,” said Robert Dietz, chief economist at NAHB. “Combined with anticipated further easing by the Fed, builders expect a slightly improving sales environment, albeit one in which persistent supply-side cost factors remain a challenge.”

The table below shows the HMI scores from the last 12 months:

The three index components experienced all grew month-over-month. Current sales increased to 38 from 34, sales in the next six months to 54 from 45, and prospective home buyer traffic to 25 from 21.

Broken down regionally, home builders in the Northeast had the most optimism with a three-month moving average score of 46. Next came HMIs of 42 in the Midwest, 31 in the South, and 28 in the West.

“Back in August, home builders finally caught a break with more buyers entering the market. That puts builders in a stronger position as we move deeper into the fall buying season,” said Hector Amendola, president at Panorama Mortgage Group. “Because interest rates remain above 6%, potential buyers are eager to find a good deal where they can purchase a home to raise their family. When home builders can secure lending products to provide saving and incentives for potential buyers, those price breaks are the key to moving inventory in this market.”

What other indicators of housing inventory say

In September, active home listings increased 17% annually to a total of 1.1 million, according to Realtor.com.

Among the 50 largest cities in the U.S., Washington, D.C. saw a 48.7% yearly jump in active listing count, trailed by 40.8% in Las Vegas and 38.6% in Baltimore. Chicago experienced the smallest annual gain of 0.6%. Grand Rapids, Mich. and New York followed with growths of 1.5% and 3.2%, respectively.

For a look ahead, the Census Bureau and Department of Housing and Urban Development put out a joint Monthly New Residential Construction Report.

With the government shutting itself down, the newest information isn’t available. September had the latest report release, covering August data. The three leading indicators of housing inventory were as follows:

First, building permits hit a seasonally adjusted annual rate (SAAR) of 1.312 million in August. That figure decreased 3.7% month-over-month and 11.1% year-over-year.

Next, housing starts reached a SAAR of 1.307 million, down 8.5% monthly and 6% annually. Lastly, a SAAR 1.608 million houses were completed in August, 8.4% higher than July but 8.4% below August 2024.

The bottom line for home buyers

Between low affordability and not enough listings, home buying has been challenging for prospective borrowers.

If you’re a house hunter, it’ll be helpful to grab every advantage you can. Always be prepared so you can move fast, negotiate your mortgage rate, and see if you qualify for down payment and/or closing cost assistance.

If you’re ready to take the next step to homeownership, reach out to a local mortgage professional.