Confidence is rising among homebuilders as they wait for a decision from the Fed

Confidence among US homebuilders rose for the first time in six months in September, just ahead of the Federal Reserve is expected to lower interest rates compared to the current 20-year high.

A gauge of housing market conditions from the National Association of Home Builders and Wells Fargo rose 2 points this month to 41, matching the average estimate of economists polled by Bloomberg. There was an increase in all regions.

Measures of potential buyer traffic and current sales rose above their 2024 lows and a six-month outlook index rose 4 points to 53, the biggest gain since January.

“With inflation easing, the Federal Reserve is expected to begin a cycle of monetary policy easing this week, which will put downward pressure on mortgage rates and also lower rates on land development and home construction loans,” says NAHB chief economist Robert. Dietz said in a prepared statement.

According to Bloomberg Intelligence analyst Drew Reading, shares of construction stocks have soared, largely in anticipation of falling interest rates. Lennar Corp. is trading at record levels ahead of its earnings report later this week, as is the iShares US Home Construction exchange-traded fund, made up of builders and related companies.

The Fed’s expected rate cut this week is expected to help lower mortgage rates in the coming months. Home financing costs have already fallen to their lowest level since February 2023 ahead of the Fed’s move, and the Mortgage Bankers Association expects the 30-year fixed rate to fall to 5.9% by the end of 2025 from 6.29% now %.

Builders have said customers are taking a wait-and-see approach to buying, partly because they’re waiting for lower financing costs and partly because they’re waiting for lower financing costs. due to the uncertainty surrounding the US presidential electionsReading wrote in a research note last week. Home sales typically rise in the year after a presidential election, he said.

The share of builders cutting prices this month fell to 32% from 33% in August, according to NAHB. The average price decline also fell, to 5%, the first time below 6% since July 2022. And the share of builders who reported using sales incentives also fell.

Data releases this week will provide further insights into the housing sector in August, with government housing starts on Wednesday and existing home sales by the National Association of Realtors on Thursday.