Home builder sentiment held steady in December as high home prices and mortgage rates balanced renewed optimism about improved regulatory business conditions in 2025. According to the NAHB/Wells Fargo Housing Market Index (HMI), builder confidence in the market for newly built single-family homes was 46 in December, flat from a month ago.
While sentiment held steady, builders expressed optimism for higher sales expectations in 2025, according to survey results.
“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 says. “This is reflected in the fact that future sales expectations have increased to a nearly three-year high.”
The December HMI also revealed 31% of builders cut home prices in December, a level unchanged from November. The average price reduction was also the same as last month, at 5%. Sales incentives remained unchanged at 60% in December.
“NAHB is forecasting additional interest rate cuts from the Federal Reserve in 2025, but with inflation pressures still present, we have reduced that forecast from 100 basis points to 75 basis points for the federal funds rate,” NAHB chief economist Robert Dietz says. “Concerns over inflation risks in 2025 will keep long-term interest rates, like mortgage rates, near current levels with mortgage rates remaining above 6%.”
The NAHB/Wells Fargo HMI gauges builder perceptions of single-family home sales and sales expectations for the next six months as either “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.” scores for each component are used to calculate a seasonally adjusted numerical index where any number over 50 indicates more builders view conditions as good than poor.
The HMI index measuring current sales conditions held steady at 48 while the metric charting traffic of prospective buyers posted a one-point decline to 31. The index tracking sales expectations for the next six months rose three points to 66, the highest reading since April 2022.
Regionally, the three-month moving average for the HMI increased two points in the Northeast, Midwest, and South to 57, 46, and 44, respectively. The three-month moving average for the HMI declined one point to 40 in the West, according to the NAHB.
