By Naveen Athrappully
Confidence among home builders regarding future sales expectations increased this month after President Donald Trump signed the One Big Beautiful Bill Act (OBBB) , the National Association of Home Builders (NAHB) said in a July 17 statement.
The NAHB/ Wells Fargo Housing Market Index (HMI), which tracks and gauges the pulse of the single-family housing market, rose by one point from June to hit the 33 level in July, said the statement.
A reading below 50 is an indication of less optimism among builders. Builder sentiment has remained in negative territory for 15 straight months, NAHB said.
The one-point improvement in July signals an improvement in sentiment.
“The passage of the One Big Beautiful Bill Act provided a number of important wins for households, home builders, and small businesses,” said NAHB Chairman Buddy Hughes.
Trump signed the OBBB into law on July 4. The bill contains certain provisions for housing that benefit real estate developers and homeowners. For instance, it sets aside $1 billion for the “sustainment, restoration, and modernization” of military unaccompanied housing for the Army, Navy, the Air Force, and the Space Force.
Another OBBB provision raises the state and local tax deduction cap from $10,000 to $40,000 for tax years 2025–2029. As such, taxpayers can now deduct up to $40,000 of state and local tax payments, such as property taxes, from their federal taxable income.
“While this new law should provide economic momentum after a disappointing spring, the housing sector has weakened in 2025 due to poor affordability conditions, particularly from elevated interest rates,” Hughes said.
The average weekly rate on a 30-year fixed-rate mortgage has remained above the 6 percent level consistently since mid-September 2022, according to data from Freddie Mac. Since the beginning of the year, rates have remained above the 6.5 percent level.
Mortgage rates are significantly influenced by the federal funds rate, which the Federal Reserve has hesitated to bring down. Since December, the Fed has kept interest rates unchanged in a range of 4.25 to 4.5 percent.
Meanwhile, the average sales price of houses sold in the United States was $503,800 in the first quarter of 2025, up from $383,000 in the first quater of 2020, according to data from the Federal Reserve Bank of St. Louis.
This combination of high home prices and elevated rates makes many homes unaffordable for a large number of prospective buyers.
NAHB Chief Economist Robert Dietz said that “single-family permits are down 6 percent on a year-to-date basis and builder traffic in the HMI is at a more than two-year low.”
He predicted single-family housing starts to “post a decline in 2025 due to ongoing housing affordability challenges.”
Mortgage Rates, Construction Sector
For the week ending July 17, 30-year rates stood at 6.75 percent.
At this rate, a buyer would need an income of almost $130,000 a year to qualify to buy the median-priced home, Lisa Sturtevant, chief economist at real estate data company Bright MLS, said in a July 17 commentary. The median household income across the United States is just around $80,000, she added.
“Higher rates are also keeping many homeowners from selling their home, as they are reluctant to trade in their very low mortgage rate for a much higher one. As home prices soften, sellers are going to be further reticent to sell because they are less likely to get the price they want for their home,” Sturtevant said.
“What does this mean for the housing market in the second half of 2025? It is likely going to continue to be a slow market. Mortgage rates will remain in the mid- to high-6 percent range. Existing home sales likely will track around last year’s levels while new home sales will drop below 2024.”
Meanwhile, optimism among construction contractors is growing despite issues in the sector, according to a July 15 statement by the Associated Builders and Contractors (ABC).
The largest contractors now have a backlog almost two months longer compared to a year back, it said.
“Despite a wide array of headwinds and disappointing construction spending data in recent months, backlog rebounded to 8.7 months in June, the same level as in April,” said ABC Chief Economist Anirban Basu.
“The durability of contractor backlog is partially due to the ongoing boom in data center construction; 1 in 7 ABC members is currently under contract to perform work on a data center.”
