US homebuilder confidence rose in September as mortgage rates fell, snapping four months of straight declines, but remained relatively subdued as rising costs continued to hold back construction.
The NAHB/Wells Fargo homebuilder confidence index rose to 41 this month from 39 in August, the National Association of Home Builders said Tuesday. A Reuters poll showed economists had expected the outlook to rise to 40 this month.
It was the first positive view of future home sales since May. The U.S. Federal Reserve is expected to begin a rate-cutting cycle at the conclusion of its policy meeting on Wednesday.
The central bank drove interest rates between 2022 and 2023 to a range of 5.25%-5.50% to reduce high inflation, causing a slowdown in the housing market, but mortgage rates fell as the Fed telegraphed rate cuts.
The average 30-year fixed-rate mortgage rate recently fell to 6.20 percent according to Freddie Mac, from a high of nearly 8 percent last October.
The Fed’s rate cuts “will put downward pressure on mortgage rates and also lower interest rates on business land development and home construction loans,” said NAHB Chief Economist Robert Dietz. “Reducing construction costs is critical to addressing persistent housing affordability challenges.”
Data earlier this month showed U.S. construction spending fell more than expected in July as increased supply weighed on single-family homebuilding. NAHB also cited greater competition among builders from rising housing inventory as a possible counterweight.
However, sentiment about sales expectations over the next six months rose four points to 53 in September from the previous month. The easing of mortgage rates also allowed builders to contain declines in home prices. The percentage of manufacturers cutting prices fell this month for the first time since April, while the average price concession was 5%, the first time below 6% since July 2022.
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Written by D Fernando
