Homebuilder Confidence Logs Surprise Drop Amid High Mortgage Rates, Supply-Side Headwinds

12:40 PM EDT, 08/18/2025 (MT Newswires) -- Homebuilder confidence in the US unexpectedly fell in August amid high mortgage rates and persistent supply-side challenges, according to National Association of Home Builders and Wells Fargo data released Monday.

The housing market index, which covers new single-family homes, decreased by one point sequentially to 32 this month. The consensus for an increase to 34 in a survey compiled by Bloomberg.

"Affordability continues to be the top challenge for the housing market, and buyers are waiting for mortgage rates to drop to move forward," NAHB Chairman Buddy Hughes said. "Builders are also grappling with supply-side headwinds, including ongoing frustrations with regulatory policies connected to developing land and building homes."

About 37% of homebuilders cut prices in August, down from 38% last month. The average price reduction was 5%, the same as it's been since November, the survey showed.

The index gauging current sales conditions decreased to 35 this month from 36 in July. Sales expectations over the next six months held steady at 43, while the measure charting prospective buyers increased by two points to 22, but remains at a "very low level," according to the NAHB survey.

"Housing affordability is central to the outlook for economic growth and inflation," NAHB Chief Economist Robert Dietz said. "Given a slowing housing market and other recent economic data, the (Federal Reserve's) monetary policy committee should return to lowering the federal funds rate, which will reduce financing costs for housing construction and indirectly help mortgage interest rates."

Recently, a survey by the University of Michigan showed that US consumer sentiment unexpectedly fell in August as inflation expectations rose. Consumer inflation slowed down in July sequentially, while the annual core rate jumped above 3%. Retail sales rose less than projected last month, a separate US government report showed.

Markets are currently pricing in an 83% probability that the Fed will lower its benchmark lending rate by 25 basis points next month, with the remaining odds in the favor of another pause, according to the CME FedWatch tool.

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