Falling mortgage rates have led to an improvement in home builder sentiment. The National Association of Home Builders (NAHB) reported that their Housing Market Index increased two points to 41 in September. However, sentiment remains in contraction territory below the key breakeven threshold of 50.
What’s the bottom line? While builders are still pessimistic, we saw improvement in all three index components (buyer traffic, current and future sales expectations). Of note, the index measuring future expectations jumped 4 points back into expansion territory above 50. NAHB Chair, Carl Harris, explained, “Thanks to lower interest rates, builders now have a positive view for future new home sales for the first time since May 2024.”