Homebuilders are counting on lower mortgage rates to boost the housing market, but they were still waiting as of earlier this month.

A measure of homebuilder confidence in the housing market fell for a fourth month in August to its lowest since last December, the National Association of Home Builders said Thursday. The NAHB/Wells Fargo Housing Market Index, which is based on surveys of builders, fell to 39 from 41 in July, remaining well below the key level of 50 that would indicate builders are generally confident about the near-term outlook for sales. 

There’s reason to believe the outlook is about to take a turn fo♔r the bette♔r. 

Sentiment Likely to Improve as Rates Fall

High mortgage rates are one of the main reasons for buil🐭der pessimism since they’ve made it much h⭕arder for buyers to afford houses, the NAHB said in a press release. 

ꦺ Since 2021, the average rate offered for a 30-year mortgage has jumped from a reco🍷rd low 2.65% and has hovered around 7% for most of the year, according to mortgage giant Freddie Mac.

Last week, however, the average rate fell to 6.47%, its lowest in more than a year, amid optimism that cooling inflation will inspire the Federal Reserve to cut its benchmark fed funds rate, which heavily influences mortgage rates.

The August NAHB ꦚsurvey didn’t fully capture the impact of the recent drop in mortgage rates since three-quarters of people who responded did so before last Thursday.

“With current inflation data pointing to interest rate cuts from the Federal Reserve and mortgage rates down markedly in the second week of August, buyer interest and builder sentiment should improve in the months ahead,” NAHB chief economist Robert Dietz said in a press release.