After three consecutive months of increases, homebuilder confidence plateaued in December. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) held steady month over month at a reading of 46.
The NAHB attributed the static reading to builders looking for a better regulatory business climate in 2025 due to the results of the 2024 presidential election. New policies under the Trump administration could offset high home prices and elevated mortgage rates.
The share of builders that cut home prices (31%) remained the same compared to November. The average price reduction remained steady at 5%, as did the share of builders (60%) using sales incentives.
In addition, the NAHB reported that homebuilders’ gauge of current sales conditions held steady at 48. The gauge measuring traffic of prospective buyers fell one point to 31, while the component charting sales expectations over the next six months jumped three points to 66, the highest reading since April 2022.
“While builders are expressing concerns that high interest rates, elevated construction costs and a lack of buildable lots continue to act as headwinds, they are also anticipating future regulatory relief in the aftermath of the election,” NAHB Chairman Carl Harris said in a statement. “This is reflected in the fact that future sales expectations have increased to a nearly three-year high.”
The three-month moving averages for the HMI rose from October to November in three of the four regions tracked by the index. The South gained two points for a reading of 44, the Northeast rose by two points to 57 and the Midwest jumped two points to 46. The West fell one point to a reading of 40.
Looking ahead, NAHB chief economist Robert Dietz said the trade group has downgraded its forecasted interest rate cuts in 2025 from 100 basis points to 75 basis points due to the continued presence of inflationary pressures.
“Concerns over inflation risks in 2025 will keep long-term interest rates, like mortgage rates, near current levels with mortgage rates remaining above 6%,” Dietz said in a statement.
