Amid Market Challenges, Builder Expectations Rise in October

Even as builders continue to grapple with market and macroeconomic uncertainty, sentiment levels posted a solid gain in October as future sales expectations surpassed the 50-point breakeven mark for the first time since last January.

Builder confidence in the market for newly built single-family homes was 37 in October, up five points from September and the highest reading since April, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today.

“While recent declines for mortgage rates are an encouraging sign for affordability conditions, the market remains challenging,” said NAHB Chairman Buddy Hughes, 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.”

“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 NAHB Chief Economist Robert Dietz. “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.”

In a sign of ongoing challenges for the housing market, the latest HMI survey also revealed that 38% of builders reported cutting prices in October. This share has alternated between 37% and 39% since June. Meanwhile, the average price reduction rose to 6% in October after averaging 5% for several months previously. The last time builders reduced prices by 6% was a year ago in October 2024. The use of sales incentives was 65% in October, unchanged from September.

Derived from a monthly survey that NAHB has been conducting for more than 40 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All the HMI subindices rose in October. The component measuring current sales conditions increased four points to 38, the index gauging future sales jumped nine points to 54 and the gauge charting traffic of prospective buyers posted a four-point gain to 25.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose two points to 46, the Midwest was unchanged at 42, the South increased two points to 31 and the West gained two points to 28.

HMI tables can be found at nahb.org/hmi. More information on housing statistics is also available at Housing Economics PLUS.