Is the home construction outlook finally brightening?
United States homebuilder confidence jumped in October, reaching its highest level since April, as easing mortgage rates offered a glimmer of relief to a market battered by affordability challenges and economic uncertainty.
The NAHB/Wells Fargo Housing Market Index (HMI) rose five points to 37. This is the sharpest monthly gain since early 2024. While still below the critical 50 threshold that signals positive sentiment, the move signaled a tentative shift in builder outlook after months of stagnation.
Builder optimism was most pronounced in expectations for the next six months, with that component of the index surging nine points to 54.
Present sales conditions improved by four points to 38, and prospective buyer traffic also edged up, though it remained subdued at 25.
“While recent declines for mortgage rates are an encouraging sign for affordability conditions, the market remains challenging,” NAHB chairman Buddy Hughes said. “Most home buyers are still on the sidelines, waiting for mortgage rates to move lower.”
Tariffs and supply challenges add pressure
US mortgage rates slipped for the second consecutive week, with the average 30-year fixed-rate mortgage (FRM) falling to 6.27% as of October 16, 2025, according to Freddie Mac’s latest Primary Mortgage Market Survey.
"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,” says NAHB chief economist Robert Dietz.
A new round of US tariffs on Canadian softwood lumber and finished wood products took effect Tuesday, adding to the mounting pressures facing housing and mortgage sectors. The measures, signed into law by President Trump last month, impose a 10% tariff on all imported softwood lumber and timber, and a 25% tariff on kitchen cabinets, vanities, and certain upholstered furniture. These are set to climb even higher in the new year.
He also recently threatened a “massive increase of tariffs” on Chinese imports, escalating tensions over China’s latest export controls on rare earth elements.
The uptick in sentiment followed a period of stubbornly high borrowing costs that had driven many would-be buyers out of the market and left builders grappling with unsold inventory.
In response, 38% of builders reported cutting prices in October—matching the trend seen since June—with the average price reduction rising to 6%, the steepest in a year. Sales incentives remained widespread, used by 65% of builders.
Regional gains and ongoing market fragility
Regional gains were led by the Northeast (46) and South (31), while the West (28) and Midwest (42) saw more modest improvements.
The NAHB estimated that the October HMI increase could translate to a 3% rise in September’s single-family building permits, based on historical modeling.
However, the market’s underlying fragility persisted, with new housing inventory only recently declining after months at levels not seen since 2007.
The HMI’s predictive power has been validated over decades, with its readings often preceding shifts in housing starts and broader market cycles.
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