Residential Real Estate News
U.S. Home Builders Express Optimism for 2025
Builder sentiment remained consistent at the close of 2024, as elevated home prices and mortgage rates balanced builders' optimism about a potential improvement in the regulatory business environment by 2025. Reflecting this optimism, builders reported heightened expectations for increased sales in the coming months.
In December 2024, builder confidence in the market for newly constructed single-family homes remained at 46, unchanged from the previous month, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
"While builders continue to face challenges from high interest rates, rising construction costs, and limited availability of buildable lots, they are hopeful about future regulatory relief following the election," said NAHB Chairman Carl Harris. "This optimism is evident in the nearly three-year high for future sales expectations."
NAHB Chief Economist Robert Dietz added, "We anticipate additional interest rate cuts from the Federal Reserve in 2025, though inflationary pressures have led us to adjust our forecast from a 100-basis-point reduction to 75 basis points. Inflation concerns will likely keep long-term interest rates, including mortgage rates, at current levels, with mortgage rates staying above 6%."
The December HMI survey found that 31% of builders reduced home prices, consistent with November. The average price cut remained at 5%. Additionally, 60% of builders used sales incentives in December, also unchanged from the prior month.
The NAHB/Wells Fargo HMI, conducted monthly for over 35 years, measures builder sentiment on single-family home sales and expectations for the next six months as "good," "fair," or "poor." Builders also rate prospective buyer traffic as "high to very high," "average," or "low to very low." These components are combined into a seasonally adjusted index, where a score above 50 indicates more builders view conditions as favorable than unfavorable.
In December 2024, the index measuring current sales conditions held steady at 48, while the measure for prospective buyer traffic dipped by one point to 31. However, the component tracking sales expectations for the next six months increased by three points to 66, marking the highest level since April 2022.
Regional three-month moving averages for the HMI showed varied trends: the Northeast rose by two points to 57, the Midwest climbed two points to 46, the South gained two points to 44, and the West declined by one point to 40.
