The NAHB Housing Market Index (HMI) for the US increased to 38 in November 2025, surpassing the consensus estimate of 37 and improving from October’s 37 reading. This marks the first monthly gain after a three-month plateau near the mid-30s, signaling tentative builder confidence recovery. However, the index remains below the 12-month average of 35.70, reflecting ongoing challenges in the housing sector.

Drivers this month

• Mortgage rates eased slightly, with the 30-year fixed rate dropping to 6.50% from 6.70% in October.
• Builder sentiment improved in the Midwest and South regions, which saw index gains of 3 and 2 points respectively.
• New home sales data showed a 1.50% MoM increase, supporting optimism.

Policy pulse

The current HMI reading remains below the 50 threshold that separates positive from negative builder sentiment. This aligns with the Federal Reserve’s ongoing restrictive monetary stance aimed at curbing inflation, which keeps borrowing costs elevated. The index’s modest rise suggests builders are cautiously optimistic but remain constrained by affordability and supply chain issues.

Market lens

Immediate reaction: US Treasury 2-year yields fell 5 basis points post-release, while the USD index dipped 0.30%, reflecting mild relief in financial markets. Equity sectors tied to homebuilding, such as DHI, saw a 0.70% uptick in early trading.

The NAHB HMI is a leading indicator of builder confidence and housing market health. Its November reading of 38 compares to a low of 32 in June and August 2025, showing a recovery trajectory. Historically, readings above 50 indicate expansion, while sub-50 levels signal contraction or caution. The current level suggests the market remains subdued but stable.

Core macroeconomic indicators

• US GDP growth slowed to 1.80% YoY in Q3 2025, reflecting broader economic cooling.
• Inflation remains sticky at 3.70% YoY, pressuring real incomes and housing affordability.
• Unemployment held steady at 3.90%, supporting steady demand but limited wage growth.

Monetary policy & financial conditions

The Federal Reserve’s policy rate remains at 5.25%, with forward guidance indicating a cautious approach to further hikes. Mortgage rates, influenced by Treasury yields, have stabilized but remain historically high compared to the sub-4% levels seen pre-2022. Credit availability for builders and buyers remains tight, constraining market expansion.

Fiscal policy & government budget

Federal fiscal policy remains restrained, with limited new housing stimulus. State and local governments continue to face budget pressures, limiting infrastructure investments that could ease supply constraints. Tax incentives for first-time buyers remain unchanged, offering some support but insufficient to drive a broad market rebound.

Drivers this month

• Mortgage rate decline contributed 0.50 points to the index.
• Improved buyer traffic added 0.30 points.
• Supply chain normalization added 0.20 points.
• Affordability constraints subtracted -0.40 points.

Market lens

Immediate reaction: The US Dollar Index (DXY) slipped 0.30% following the report, reflecting softer risk-off sentiment. The 2-year Treasury yield declined 5 basis points, indicating reduced short-term rate hike expectations. Homebuilder equities such as PHM and TOL gained 0.50% and 0.60% respectively, showing positive investor response.

Looking ahead, the NAHB HMI’s trajectory will depend on several macro and micro factors. The housing market faces a complex interplay of monetary policy, affordability, and supply constraints. We outline three scenarios for the next six months:

Bullish scenario (30% probability)

• Mortgage rates decline below 6%, spurring buyer demand.
• Supply chain improvements accelerate new home deliveries.
• Fiscal incentives for housing are expanded.
• HMI rises above 45, signaling robust builder confidence.

Base scenario (50% probability)

• Mortgage rates stabilize near current levels (6.50%).
• Supply constraints ease slowly, keeping new home starts steady.
• Builder confidence remains in the high 30s to low 40s range.
• Housing market growth is moderate but uneven across regions.

Bearish scenario (20% probability)

• Further Fed tightening pushes mortgage rates above 7%.
• Inflation spikes reduce affordability further.
• Builder sentiment falls below 35, reflecting contraction fears.
• Housing market stagnates or contracts, impacting broader economic growth.

Policy pulse

Monetary policy remains the key risk factor. Any shift toward easing could boost housing, while persistent inflation and rate hikes would dampen demand. Fiscal policy remains neutral, with limited near-term impact expected.

The November 2025 NAHB Housing Market Index signals a cautious but positive shift in builder sentiment after months of stagnation. While the index remains below expansionary levels, the modest rise reflects improving financial conditions and regional strength. However, affordability challenges, tight credit, and geopolitical uncertainties continue to cloud the outlook.

Investors and policymakers should monitor mortgage rates, inflation trends, and fiscal developments closely. The housing market’s health is critical for broader economic stability, given its multiplier effects on employment, consumer spending, and financial markets.

In sum, the NAHB HMI’s latest print suggests a market in tentative recovery, with upside potential balanced by significant downside risks.