For the first time since last January, future sales estimates exceeded the 50-point breakeven point in October, indicating a strong increase in sentiment levels despite builders’ ongoing struggles with market and macroeconomic uncertainty.
“While recent declines for mortgage rates are an encouraging sign for affordability conditions, the market remains challenging,” said Buddy Hughes, NAHB Chairman, a home builder and developer from Lexington, N.C. “The housing market has some areas with firm demand, including smaller builders shifting to remodeling and ongoing solid conditions for the luxury market. However, most home buyers are still on the sidelines, waiting for mortgage rates to move lower.”
According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence in the market for newly constructed single-family homes was 37 in October, up five points from September and the highest level since April.
“The HMI gain in October is a positive signal for 2026 as our forecast is for single-family housing starts to gain ground next year,” said Robert Dietz, NAHB Chief Economist. “The 30-year fixed-rate mortgage fell from just above 6.5% at the start of September to 6.3% in early October. 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.”
With the government shutdown continuing and an expectation of no Census housing construction data for September being published this week, Dietz noted the following: “Based on modeling of historical data, the October increase for the HMI suggests an approximate 3% increase for the September single-family permit data on a seasonally adjusted annual rate basis. Our model suggests a 2% to 4% range for the increase based on the statistical relationship.”
The most recent HMI poll also showed that 38% of builders reported lowering prices in October, which is indicative of continued difficulties in the housing market. Since June, this percentage has fluctuated between 37% and 39%. In the meantime, after averaging 5% for a few months prior, the average price drop increased to 6% in October. Builders haven’t lowered prices by 6% since October 2024, one year ago. Similar to September, 65% of sales incentives were used in October.
The NAHB/Wells Fargo HMI rates builder opinions of current single-family home sales and sales projections for the next six months as “good,” “fair,” or “poor.” It is based on a monthly survey that NAHB has been conducting for over 40 years. Additionally, builders are asked to score the traffic of potential purchasers as “high to very high,” “average,” or “low to very low” in the survey. Each component’s score is then combined to create a seasonally adjusted index; if the value is greater than 50, it means that more builders consider the conditions to be good than bad.
Additional Findings:
- In October, every HMI subindex increased. The gauge recording the traffic of potential purchasers saw a four-point gain to 25, the index indicating future sales soared nine points to 54, and the component reflecting current sales conditions increased four points to 38.
- According to regional HMI scores’ three-month moving averages, the Northeast improved by two points to 46, the Midwest remained at 42, the South rose by two points to 31, and the West gained by two points to 28.
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