Homebuilder confidence rose in October to its highest level since April, though sentiment remained largely negative, new figures from the National Association of Home Builders (NAHB) show.
Based on a survey conducted by the NAHB and Wells Fargo, the Housing Market Index (HMI) measures builder sentiment on current single-family home sales and sales expectations for the next six months on a scale of 0 to 100. Any result under 50 indicates a general lack of builder confidence.
An HMI reading of 32 in August tied the index’s third-lowest mark since 2012, in the aftermath of the 2008 financial crisis. The HMI stayed flat at 32 in September but rose five points to 37 in October, reflecting an improvement in sales sentiment.
“While recent declines for mortgage rates are an encouraging sign for affordability conditions, the market remains challenging,” said NAHB Chairman Buddy Hughes in a press release. Hughes noted that “most homebuyers are still on the sidelines, waiting for mortgage rates to move lower.”
Ongoing challenges for new-home builders include elevated borrowing costs, high material and labor costs and a slowdown in sales of standing inventory. Builders have ramped up incentives to counter increased competition from rising existing home inventories, as more active listings increase buyers’ options and negotiating power.
Around 65% of builders used sales incentives in October, unchanged from September, the NAHB reports. Meanwhile, 38% of builders reported cutting prices in October, a share that has remained between 37% and 39% since June. The average price cut increased to 6% in October after averaging 5% over several prior months.
Meanwhile, forward commitments — whereby builders secure below-market financing from lenders to offer more attractive mortgage terms to buyers, boosting sales of speculative and standing new-home inventory — have lost steam as weakness in the labor market pushes the Federal Reserve to lower borrowing costs.
Better terms on forward commitments may be around the corner in 2026 if interest rates continue to decline, but this amalgamation of pressures has homebuilders in something of a recalibration period while uncertainties persist.
“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,” noted Robert Dietz, chief economist at the NAHB, in Thursday’s press release.
Improving builder sentiment in October was driven by increases across the HMI’s three component indexes. On a monthly basis, builders’ outlook for current sales rose from 34 to 38, six-month sales expectations rose nine points from 45 to 54, and traffic of prospective buyers rose from 21 to 25.
Dietz added that improved sentiment in October reflects “a positive signal for 2026” given the NAHB’s forecast for single-family housing starts “to gain ground next year.”
Builders’ outlooks improved across the four major regions of the U.S., though most notably in the Northeast, which rose from a revised reading of 44 in September to 55 in October — the only regional HMI to cross into positive territory.
The regional HMI for the West rose to 30 in October from 26 in September and 27 in August, while the HMI for the South rose to 35 from 29 in both September and August. The HMI for the Midwest has remained flat for the past three months, rising to 42 in October from 41 in September and 42 in August.
