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Despite the recent sharp rise in mortgage rates, homebuilders are more optimistic about the housing market.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index rose two points to 43 in October from the previous month, marking the second straight monthly gain. October’s reading was higher than economists’ estimates of 42, according to Bloomberg data.

However, any reading below 50 indicates that more builders view conditions as worse than better.

“While housing affordability remains low, builders are feeling more optimistic about 2025 market conditions,” said NAHB President Carl Harris of Wichita, Kan. The custom home builder from I said in a press release.

According to Freddie Mac, mortgage rates have been on the rise recently, with the average rate for a 30-year fixed-rate loan rising to 6.32% last week. Mortgage rates have followed U.S. Treasury yields, with strong job growth and steady inflation returning traders’ expectations of how aggressively the central bank will cut interest rates.

The NAHB survey showed more builders made offers in October. 62% of builders used some form of sales incentive to close a deal, up from 61% in September. Meanwhile, builders cut home prices by 32% to boost sales in October, the same as last month. The average price reduction was 6%, compared to 5% last month.

The gauge’s sales outlook for the next six months rose 4 points to 57. Both the prospective-buyer traffic measure and the NAHB index of current sales levels gained two points in October.

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