With inflation gradually easing and builders anticipating mortgage rates will moderate in coming months, builder sentiment moved higher for a second consecutive month despite challenging affordability conditions. Builder confidence in the market for newly built single-family homes was 43 in October, up two points from a reading of 41 in September, according to the NAHB/Wells Fargo Housing Market Index (HMI). Despite the beginning of the Fed’s easing cycle, many prospective home buyers remain on the sideline waiting for lower interest rates. We are forecasting uneven declines for mortgage interest rates in the coming quarters, which will improve housing demand but place stress on building lot supplies due to tight lending conditions for development and construction loans. However, while housing affordability remains low, builders are feeling more optimistic about 2025 market conditions. A wildcard for the outlook remains the election.