Homebuilder Sentiment Drops to a One-Year Low as Rates Climb

U.S. homebuilder sentiment dropped to a one-year low in September as rising mortgage rates dampen demand for housing, Reuters reported. The National Association of Home Builders/Wells Fargo Housing Market index fell three points to 32, down from 35 in August — the lowest reading since September 2025 and below the 34 economists had forecast.

Builders blamed a combination of rising mortgage rates, labor shortages tied to immigration enforcement, and higher material costs from tariffs. “Buyer traffic has weakened across much of the country, largely because of rising mortgage rates,” said NAHB chairman Bill Owens, adding that builders also face higher material costs, rising gas and diesel prices, and persistent labor shortages.

The rate backdrop is stiff: Freddie Mac’s 30-year fixed averaged 6.76% last week, the highest in more than a year, and the 10-year Treasury yield hit 5.041% — the highest since July 2007. Separately, the National Association of Realtors reported that existing-home sales fell to a 14-month low in August.

Economists expect sentiment to stay subdued as mortgage rates move in tandem with Treasury yields, which have been climbing on expectations of more Fed rate hikes. In other words, the cost pressure on buyers isn’t going away soon.

For the South Bay, the implication is two-sided: softer builder sentiment means less pressure from new construction adding inventory, but it also means fewer builders offering the incentives that have helped offset high rates nationally. Resale buyers here should shop lenders aggressively and lock in terms rather than betting on rate relief.

Source: Reuters — https://www.reuters.com/business/us-homebuilder-sentiment-drops-12-month-low-september-2026-09-16/

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