US homebuilder sentiment barely rises as costs stymie sector

Homebuilder sentiment in the US barely improved this month as elevated construction and borrowing costs continued to restrain the housing market.

The overall Housing Market Index from the National Association of Home Builders and Wells Fargo edged up 1 point to 35 this month, according to data released Monday. A reading below 50 indicates more builders see conditions as poor than good and the index has remained below that level since May 2024.

“Our latest builder survey continues to show signs of weakness in the home building market,” NAHB Chief Economist Robert Dietz said in a statement. “August marked the 16th straight month that at least 30% of builders reported cutting prices to support demand, as well as the 16th consecutive month with the HMI below 40.”

Among the index’s components, a gauge of present sales rose 2 points to 39. Measures of both future sales expectations and prospective buyer traffic were unchanged from a month earlier.

The sour mood among builders reflects a new-home market leaning on various incentives and mortgage rate subsidies to stoke demand. The average 30-year fixed mortgage rate is hovering just below the one-year high it hit in late July.

Builders have been attempting to lure would-be buyers with sweeteners, eating into profits at the same time higher fuel prices raise materials costs. In August, 63% of builders reported using sales incentives, unchanged from a month earlier. Meantime, 35% reported cutting prices, down from 37% in July, NAHB data show.

The report showed sentiment among builders in the South, the nation’s biggest homebuilding region, climbed 1 point to 32. Similar increases were seen in both the West and Northeast.

On Tuesday, the government will release July housing starts and building permits data, while the National Association of Realtors will report on July pending home sales.