Homebuilder sentiment improves on late spring surge in demand

Higher mortgage rates, rising gas prices and continued economic uncertainty over the war with Iran are all still weighing on potential homebuyers. Builders, however, are feeling slightly better about their businesses, seeing a potential late spring surge.

After a sharp drop in April, homebuilder sentiment in the market for single-family homes rose 3 points in May to a readout of 37 on the Association of Home Builders (NAHB)/Wells Fargo Housing Market Index.

Housing economists had expected the index to remain unchanged month over month. Still, anything below 50 on the index is considered negative sentiment.

The index stood at 34 in May 2025, when mortgage rates were hovering around 7%. They are lower now, but have been rising over the past few weeks. The average rate on the 30-year fixed mortgage is now 6.65%, according to Mortgage News Daily.

"Recent increases for long-term interest rates will continue to hold back home buyer demand," said Robert Dietz, NAHB's chief economist, in a release. "Although some regional markets, including parts of the Midwest, are showing relative strength, the housing market continues to face significant affordability challenges."

All three of the index's components were higher by 3 points month over month, with current sales conditions rising to 40, buyer traffic jumping to 25 and future sales expectations up to 45.

The survey also found fewer builders cutting prices in May, at 32% compared with 36% in April. The use of sales incentives was reported at 61% in May, up slightly from 60% in April.