U.S. home builder sentiment unexpectedly improved in August, rising one point to 35 from 34 in July, according to the National Association of Home Builders/Wells Fargo Housing Market Index. The reading beat economists’ expectations for a decline to 33 but still reflected weak conditions across the residential construction sector. High mortgage rates, elevated building costs and broader economic uncertainty continued to weigh on builders and prospective buyers.
The index measuring current sales of single-family homes rose to 39 from 37, its highest level since May, while gauges for future sales and prospective buyer traffic were unchanged. Sentiment improved slightly in the Northeast, South and West but was unchanged in the Midwest. August marked the 16th consecutive month that builder sentiment remained below 40, the longest such stretch since 2012, while the index has stayed below the 50 level indicating positive conditions for more than two years.
Builders are increasingly relying on price cuts and sales incentives to support demand as affordability remains under pressure. At least 30% of builders have reported cutting prices for 16 consecutive months, with the average reduction holding at 6% in August. Nearly two-thirds of builders offered some form of incentive. Meanwhile, the 30-year fixed mortgage rate stood at 6.77% in the week ended August 7, while higher gasoline and diesel prices have added to construction costs, keeping the housing market under strain.
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