US homebuilder sentiment rises by most since 2024

Confidence among US homebuilders rose this month by the most since early 2024, boosted by lower mortgage rates that are chipping away at the nation's affordability problem.

An index of market conditions from the National Association of Home Builders and Wells Fargo increased 5 points in October to 37, the highest since April. A value below 50 means more builders see conditions as poor than good. Economists surveyed by Bloomberg estimated sentiment would tick up slightly to 33.

"While recent declines for mortgage rates are an encouraging sign for affordability conditions, the market remains challenging," NAHB Chairman Buddy Hughes said in a statement Thursday. "Most home buyers are still on the sidelines, waiting for mortgage rates to move lower."

Components of the index all rose, including the highest reading for sales expectations in the next six months since the start of the year. Gauges of present sales and prospective buyer traffic climbed to the highest levels since April, when mortgage rates had also been declining.

Borrowing costs fell even further in September to a one-year low, sparking what turned out to be a modest boost in buyer demand. Builder KB Home suggested in late September that its orders didn't match such a big drop in rates.

"I wouldn't say that we've seen a big uptick yet, or maybe the uptick that we would expect to see from such a change in mortgage rates," company President Robert McGibney said on KB Home's third-quarter earnings call. "And I think to some extent buyers are in maybe a bit of a wait-and-see mode."

For now, builders have been slowing their pace of construction and trying to lure buyers with a mix of price cuts and sales incentives. In October, 38% of builders reported cutting prices, similar to recent months, according to NAHB. More broadly, 65% of builders reported used sales incentives, unchanged from a month earlier.

Confidence rose across the country, led by the Northeast and South, which is the US's biggest homebuilding region. Gains were more tame in the West and Midwest.

The National Association of Realtors will provide an update on the existing-home market on Oct. 23, when it releases a report on previously owned home sales in September.