Homebuilders are feeling more confident about the housing market despite a recent sharp rise in mortgage rates.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index rose two points to 43 in October from the previous month, marking the second consecutive monthly gain. October’s reading was higher than economists’ estimates of 42, per Bloomberg data.
Still, any reading under 50 indicates more builders view conditions as poor rather than good.
“While housing affordability remains low, builders are feeling more optimistic about 2025 market conditions,” NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan, said in a press release.
Mortgage rates have been rising recently, with the average rate on a 30-year fixed rate loan climbing to 6.32% last week from 6.12% a week earlier in the biggest week-over-week increase since April., according to Freddie Mac. Mortgage rates, which tend to follow US Treasury yields, have been recently moving upward as strong job growth and persistent inflation leads traders to pare back their expectations on how aggressively the Fed will cut interest rates.
The NAHB survey also showed more builders offered concessions in October. The survey found that 62% of builders used some sort of sales incentive to close the deal, up from 61% in September. Meanwhile, 32% of builders cut home prices to bolster sales in October, similar to last month. The average price reduction was 6%, up from 5% last month.
The gauge measuring sales outlook over the next six months rose 4 points to 57. The prospective-buyer traffic gauge and the NAHB index of current sales conditions also both gained two points in October.