Homebuilders are feeling more confident about the housing market despite a recent sharp rise in mortgage rates.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index rose two points to 43 in October from the previous month, marking the second consecutive monthly gain. October’s reading was higher than economists’ estimates of 42, per Bloomberg data.
Still, any reading under 50 indicates that more builders view conditions as poor rather than good.
NAHB CEO Jim Tobin told Yahoo Finance on Thursday after the release that a primary driver of the increase is the Federal Reserve’s recent move to bring down interest rates.
Read more: How the Federal Reserve rate decision affects mortgage rates
Last month, the Fed cut the benchmark rate, giving would-be buyers renewed hope that mortgage rates could fall even further. Today, mortgage rates are down more than a percentage point from this time last year when rates were hovering near 8%.
“Our survey members, in particular, are feeling that we’re on the backside of the bad news and that we are looking forward to a lower interest rate environment, certainly for mortgage rates in the future, and that the market’s going to come back strong,” Tobin said.
But mortgage rates have been rising recently, with the average rate on a 30-year fixed rate loan climbing to 6.44% this week from 6.32% a week earlier, hitting the highest level since August, according to Freddie Mac. Mortgage rates, which tend to follow US Treasury yields, have been recently moving upward as strong job growth and persistent inflation leads traders to pare back their expectations on how aggressively the Fed will cut interest rates.
The NAHB survey also showed more builders offered concessions in October. The survey found that 62% of builders used some sort of sales incentive to close the deal, up from 61% in September. Meanwhile, 32% of builders cut home prices to bolster sales in October, similar to last month. The average price reduction was 6%, up from 5% last month.
The gauge measuring sales outlook over the next six months rose 4 points to 57. The prospective-buyer traffic gauge and the NAHB index of current sales conditions also both gained two points in October.
Dani Romero is a reporter for Yahoo Finance. Follow her on X @daniromerotv.
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