The current mortgage and real estate landscape presents a complex picture, marked by both resilience and persistent challenges. From fluctuating pending home sales to mixed construction reports and dipping builder confidence, understanding the underlying currents is crucial for buyers, sellers, and industry professionals alike. CMRE is here to break down the latest insights.
Pending Sales See a Modest Regional Rebound
August brought a slight glimmer of hope for pending home sales, with the National Association of REALTORS® (NAR) reporting a 0.3% increase in their Pending Home Sales Index (PHSI) from July. However, this national uptick masks significant regional divergence. While the South and West saw gains of +2.3% and +3.0% respectively, the Northeast and Midwest experienced declines of -4.2% and -1.6%.
Despite income growth outpacing home price growth, NAR Chief Economist Lawrence Yun notes that elevated mortgage rates continue to cap buying power and housing demand. Nationally, pending sales remain roughly 30% below pre-pandemic levels, a stark reminder that lower borrowing costs are a key ingredient to unlocking sidelined market activity.
Construction Activity: An Uneven Recovery
Residential construction data for August painted a mixed picture. Single-family housing starts showed strength, increasing a solid 7.6% to an annual rate of 918,000 units after a dip in July. This suggests builders are still focused on addressing the supply shortage in the single-family sector.
However, other indicators softened. Overall housing starts, building permits, and housing completions all declined from July levels. Total housing starts fell 2.6% to 1.275 million, and completions saw a sharp 11.9% drop to 1.128 million. The multi-family segment, known for its volatility, saw a pronounced pullback in starts. This unevenness highlights the complexities builders face in bringing new inventory to market.
Builder Confidence Hits a Three-Year Low
The challenges for builders are evident in the latest sentiment report. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) for September fell three points to 32, matching September 2025 as a three-year low.
This decline is largely attributed to higher mortgage rates dampening buyer traffic, as well as persistent issues like rising material costs, increasing gas and diesel prices, and worsening labor shortages. Builders also report difficulties in finding available lots, with 42% rating current lot availability as poor. To counteract these headwinds, builders are increasingly turning to incentives; 38% reported price cuts in September (up from 35% in August), and 66% used sales incentives, the highest share since December.
What Does This Mean for You?
The housing market is clearly in a period of adjustment. While some areas show signs of life, the overarching theme is one where higher rates are a significant constraint on demand and affordability. Builders are navigating a challenging environment of costs and labor, yet single-family construction is still pushing forward. For potential homebuyers and sellers, staying informed and working with expert advisors like those at CMRE is more important than ever to understand local nuances and navigate these shifting market conditions.