Rising mortgage rates, rising gas prices and continued economic uncertainty over the war with Iran continue to weigh on potential homebuyers. But builders are feeling a little better about their business as they look ahead to the possibility of higher prices in late spring.
Homebuilder sentiment in the single-family home market rose 3 points in May to 37 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index after plummeting in April.
Housing economists had expected the index to remain unchanged month-over-month. Still, an index below 50 is considered negative sentiment.
The index was 34 in May 2025, when mortgage interest rates were hovering around 7%. It’s down now, but it’s been up in recent weeks. The average interest rate on a 30-year fixed mortgage is currently 6.65%, according to Mortgage News Daily.
“Recent increases in long-term interest rates will continue to dampen homebuyer demand,” NAHB Chief Economist Robert Dietz said in a release. “While some regional markets, including parts of the Midwest, are performing relatively well, the housing market continues to face significant affordability challenges.”
All three components of the index rose 3 points month-over-month, with current sales status rising to 40, buyer traffic surging to 25, and future sales expectations rising to 45.
The survey also found that 32% of builders reduced prices in May, compared to 36% in April. The utilization rate of sales incentives in May was 61%, a slight increase from 60% in April.
