U.S. housing market activity remains tepid, with yet another increase in the use of price incentives by builders to attract homebuyers in September. However, the decline in mortgage rates combined with the high likelihood of a Federal Reserve rate cut this week has improved the near-term outlook.

While builders continue to contend with rising construction costs, a recent drop in mortgage interest rates over the past month should help spur housing demand, the NAHB said.

NAHB expects the Fed to cut the federal funds rate at their meeting this week, which will help lower interest rates for builder and developer loans, it added.

Builder confidence in the market for newly built single-family homes was 32 in September, unchanged from August. Sentiment has remained stranded in negative territory for 17 straight months.

[B]uilders expressed optimism that a more favorable interest rate climate could bring hesitant buyers off the sidelines in the final quarter of 2025, the report said.

Thirty-nine percent of builders surveyed said they slashed prices in September. This compares with 37 percent in August and 38 percent in July.

The average price reduction was 5 percent in September, the same as every month since November 2024. The use of sales incentives was 65 percent, down from 66 percent in August.

Builder sentiment is seen remaining depressed with the housing market index at 33 in September after declining to 32 in August from 33 in July and 41 in September last year.

The housing market index is a monthly composite that tracks home builder assessments of present and future sales as well as buyer traffic. The index is a weighted average of separate diffusion indexes: present sales of new homes, sales of new homes expected in the next six months, and traffic of prospective buyers of new homes.

This report provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as the housing market index, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Whether the housing market index reflects new home sales or home resales, once a home is sold, it generates revenues for the realtor and the builder. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items home buyers might purchase. The economic"ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, home sales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the existing home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.