by Mike Colpitts 
- Home builder confidence rises as mortgage rates fall, ushering in a new wave of confidence in the housing market.
- The jump in builder confidence topped the 50-point threshold, demon-strating the possibility of improving macroeconomic conditions, despite the Trump tariffs slowdown.
- Nearly two out of three homebuilders used incentives to close home sales, largely because of slower new home sales.
Home builder confidence rises as mortgage rates fall to the lowest levels in three years, according to the National Association of Home Builders. The increase comes as the Florida housing market experiences a jump in home sales.
Builder sentiment levels topped the 50-point break even threshold for the first time since January. Macroeconomic uncertainty largely driven by the cost of tariffs implemented by President Trump have slowed the U.S. housing market further. But lower mortgage rates have driven more home sales in Florida.
The builder index was 37 in October before moving higher, up five points from September. The government shutdown makes the chances of getting additional government figures on the market unlikely.
“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.”
Nearly two out of three new home builders (65%) used sales incentives to close sales during the month. The average price reduction rose to 6% in October after averaging 5% for several months. The last time builders reduced prices by 6% was a year ago in October 2024.
“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. “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.”
The monthly survey of new home builders has been taken 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.”
As new home builder confidence rises, 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 measuring traffic of prospective buyers posted a four-point gain to 25.