Workers install the roof of a house under construction in Vacaville, California, United States, Thursday, June 26, 2025.
David Paul Morris | Bloomberg | Getty Images
Rising mortgage rates, rising gas prices and lingering economic uncertainty related to the war with Iran are still weighing on potential homebuyers. Builders, however, are feeling slightly better about their business, seeing a possible surge in late spring.
After a sharp decline in April, homebuilder confidence in the single-family home market rose 3 points in May to 37 according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index.
Housing economists expected the index to remain unchanged month over month. However, anything below 50 on the index is considered negative sentiment.
The index stood at 34 in May 2025, when mortgage rates hovered around 7%. They are now lower, but have been increasing for several weeks. The average rate for a 30-year fixed mortgage is now 6.65%, according to Mortgage News Daily.
“Recent increases in long-term interest rates will continue to dampen home buyer demand,” Robert Dietz, NAHB chief economist, said in a statement. “Although some regional markets, including parts of the Midwest, are showing relative strength, the housing market continues to face significant affordability challenges.
All three components of the index increased 3 points month over month, with current sales conditions rising to 40, buyer traffic increasing to 25, and future sales expectations up to 45.
The survey also reveals that fewer manufacturers reduced their prices in May, 32% compared to 36% in April. The use of sales incentives was reported at 61% in May, up slightly from 60% in April.