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Mortgage Rates Rise as Treasury Yields Top 5% – Eye On Housing

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Mortgage rates rose sharply in September as multiple factors applied significant upward pressure on the U.S. treasury yields. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.86% in September, up nearly 20 basis points (bps) from August. The recent increase effectively erased the improvement in mortgage rates over the past year, with the 30-year mortgage rate reaching 7.03% by the end of the month. Compared to a year ago, the average rate is higher by 51 bps. The 15-year mortgage rate averaged 6.20% in September, up 22 bps from August and 70 bps from a year ago.

The 10-year Treasury yield, a key benchmark for long-term borrowing, jumped 26 bps to an average of 4.94% in September and surpassed 5.00% toward the end of the month. Yields climbed as bond markets priced in a Federal Reserve rate hike ahead of the September FOMC meeting, while weak demand at Treasury auctions added further upward pressure. Broader concerns over elevated oil prices and geopolitical tensions, the U.S. fiscal deficit, and strong competition for capital from AI and hyperscaler investment also contributed to the rise in long-term yields.

The Federal Reserve ultimately raised the federal funds rate by a quarter percentage point at its September meeting, bringing the target range to 3.75% to 4.00%. The Fed noted that economic activity continued to expand at a solid pace, domestic spending remained resilient, and capital investment was robust, while inflation and uncertainty surrounding geopolitical developments remained elevated.



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Two-Story Foyer Share Edges Up in 2025 – Eye On Housing

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In 2025, around a quarter of new homes were built with a two-story foyer, slightly up from 2024, according to data obtained from the Census Bureau’s Survey of Construction (SOC) and tabulated by NAHB. Despite the increase, the market share of two-story foyers has generally trended downward since 2017, with most new single-family homes being built without a two-story foyer both nationally and regionally.

According to the Census, a two-story foyer is defined as the entranceway inside the front door of a house and has a ceiling that is at the level of the second-floor ceiling. In the United States, the share of new homes with two-story foyers slightly rose from 24.6% to 25.6% in 2025, the highest level since 2022, but remains below the levels recorded from 2017 to 2020. This feature is often considered energy-inefficient and is seen as undesirable by both builders and buyers. The declining trend is in line with NAHB’s What Home Buyer’s Really Want, in which recent and prospective buyers rated their preference for 18 specialty rooms. The study found that two-story entry foyers were one of the least desired specialty rooms, with 32% buyers likely to reject a potential home with this feature, and only 13% seeing it as an essential/must-have feature.

In 2025, the share of new homes with a two-story foyer was below 40% in all nine divisions, ranging from 15.1% in the Pacific to 35.8% in the Middle Atlantic. Compared to 2024, the share of two-story foyers declined in four of the nine divisions, including the East North Central, East South Central, West South Central and Mountain. The East South Central division reversed the notable increase seen in 2024, decreasing from 29.6% to 26.1%. Meanwhile, shares in both the East North Central and West South Central fell to their lowest levels since NAHB began tracking this data in 2017.

Meanwhile, shares of two-story foyers rose in the other five divisions. New England increased from 23.2% to 28.2%, the highest share since 2017. The West North Central rebounded from 21.5% to 26.2%, after declining in 2024. The Middle Atlantic continued its upward trend for the third consecutive year, rising from 35.3% to 35.8%. The Pacific rose from 12.8% to 15.1% but still had the lowest share among the nine divisions. The South Atlantic saw a modest increase, from 25.1% to 26.9%.

The share of two-story foyers also varies by home size, with smaller homes generally less likely to have a two-story foyer. In 2025, 65.5% of new homes with 5,000 square feet or more had a two-story foyer, the highest level since 2017. The share was 40.4% for3,000 to 4,999 square foot homes. For homes under 3,000 square feet, the share ranged from 9.9% to 24.5%.

By purpose of construction, owner-built homes had the highest share of two-story foyers at 34.7%, up from 25.5% in 2024 and the highest level since 2017. In contrast, contractor-built homes fell from a share of 31.7% in 2024 to 29.8% in 2025, the fourth consecutive decline and the lowest level since 2017. Built-for-rent homes had the lowest share at 6.5%, down from 9.9% in 2024.



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U.S. Economy Adds 29,000 Jobs in September as Prior Months Are Revised Down – Eye On Housing

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The U.S. labor market cooled in September, with nonfarm payroll employment increasing by just 29,000 as downward revisions erased most of August’s previously reported strength. The unemployment rate edged up to 4.2%, as both employment and the labor force continued to grow. The September report indicates that the labor market is losing momentum, with job growth slowing and unemployment edging higher.

The labor market has lost jobs in seven of the last 21 months.

Wage growth continued to cool, with average hourly earnings rising 3.0% year over year in September, down from 3.1% in August and marking the slowest pace of 2026. Average hourly earnings reached $37.81. The continued deceleration in wage growth points to easing wage pressures, even as the pace of hiring moderates.

National Employment

According to the Employment Situation Summary reported by the Bureau of Labor Statistics (BLS), total nonfarm payroll employment increased by 29,000 in September, following a downwardly revised gain of 133,000 in August. Revisions to prior months were broadly negative, reversing the upward revisions reported last month. The change for July was revised down by 31,000, from a gain of 21,000 reported last month to a decline of 10,000. The change for August was revised down by 29,000, from the preliminary estimate of 162,000 to 133,000. Combined, these revisions subtracted 60,000 jobs from previously reported totals, compared with the 55,000 upward revision reported in the prior month.

Job growth in 2026 has slowed again. Through September, monthly payroll gains have averaged 68,000 based on the current data vintage, down from the 80,000 pace reported through August, reflecting both September’s modest print and the downward revisions to July and August. This compares with an average of just 10,000 per month in 2025 and 122,000 per month in 2024. Over the past 12 months, total nonfarm employment has grown by 496,000, down from the 603,000 gain reported a month ago.

The unemployment rate rose to 4.2% in September from 4.1% in August, though it remains two-tenths of a point below its year-ago level of 4.4%. Over the month, the number of employed persons rose by 406,000, while the number of unemployed persons increased by 78,000. Combined, the civilian labor force expanded by 485,000 in September, continuing the labor force growth that began in August.

Meanwhile, the labor force participation rate—the proportion of the population either looking for a job or already holding a job—rose 0.2 percentage points to 61.8% in September, marking its third consecutive monthly increase. However, the rate remains well below its pre-pandemic level of 63.3% recorded at the start of 2020. Among prime working-age individuals (aged 25 to 54), the participation rate rose 0.3 percentage points to 83.7%, matching its year-ago level.

Outside of construction, employment gains in September were led by health care (+17,000) and leisure and hospitality (+10,000), with manufacturing (+9,000) and transportation and warehousing (+7,600) also expanding. These gains were partially offset by declines in government (-17,000) and information (-10,000).

Construction Employment

Employment in the overall construction sector rose by 11,000 jobs in September, following a gain of 16,000 in August, which was revised down from the 22,000 originally reported. Within the industry, residential construction employment declined by 4,900, reversing August’s gain (also revised down, from 10,700 to 7,900), while nonresidential construction added approximately 16,100 jobs.

Residential construction employment stood at 3.3 million in September, including 923,000 workers employed by builders and remodelers, up from 920,000 in August, and approximately 2.3 million residential specialty trade contractors.

The six-month moving average of residential construction employment changes worsened to a loss of approximately 4,400 jobs per month in September, from a loss of roughly 2,033 in August. Over the last 12 months, residential construction has shed a net of 32,800 jobs, marking the nineteenth consecutive month of year-over-year decline. Despite these losses, residential construction employment remains 1,280,600 positions above its post-Great Recession low. This cushion narrowed from 1,285,500 in August, reflecting September’s employment loss.

Meanwhile, the unemployment rate for construction workers rose to 4.3% in September on a seasonally adjusted basis, up from 4.1% in August but still roughly four-tenths of a point below its year-ago level of 4.7%.



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Private Residential Construction Spending Posts Broad-Based Gains in August – Eye On Housing

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Private residential construction spending rose in August 2026 following a series of declines during the second quarter of the year. According to the latest construction spending data from the U.S. Census Bureau, private residential construction spending came in at a seasonally adjusted annual rate (SAAR) of $882.3 billion in August, up 1.1% from July but down 4.8% from a year ago.

The increase in spending occurred across all residential sectors, with improvement (remodeling) spending posting the largest monthly gain at 2.5%. Over the year, however, remodeling spending was down 7.4%. Both spending on single-family and multifamily construction increased by 0.2% in August, but decreased 3.5% and 0.6% from a year ago, respectively. The decline in single-family construction spending is consistent with weak builder sentiment reflected in the NAHB/Wells Fargo Housing Market Index (HMI), amid rising interest rates and cost.

The NAHB construction spending index is shown in the graph below. The index illustrates how spending on single-family construction has slowed since early 2024, reflecting the impacts of elevated interest rates and ongoing uncertainty over building material tariffs. Multifamily construction spending growth has also slowed down after the peak in June 2023, with the index largely plateauing since late 2024.

In contrast, improvement spending has been on an upward trend since 2023, supported in part by the aging housing stock and sustained demand for renovation. However, the latest data is consistent with a 2026 soft patch for remodeling.

Private nonresidential construction spending continued its upward trend. August’s spending rose 1.0% to a SAAR of $773.0 billion, although it remained 1.0% below the previous year. Data center construction, a subcategory within office construction, remained strong with spending increasing 7.5% month-over-month and 73.2% year-over-year, due to buildout of artificial intelligence infrastructure. The share of data centers as a percentage of spending on total private nonresidential construction surpassed 10% in July 2026.



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AI Exposure Remains Relatively Low Across Most Construction Occupations – Eye On Housing

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Artificial intelligence (AI) is rapidly changing how work gets done, but its impact varies considerably across occupations. For most construction occupations, near-term exposure to AI remains relatively low. An NAHB analysis of U.S. Bureau of Labor Statistics (BLS) data finds that 45 of 47 selected construction-related occupations—or about 96%—are classified as having “low” or “moderate” relative AI exposure. Only two occupations are classified as having “high” exposure, and none are classified as “very high”. These findings suggest that although AI is likely to change how construction work is performed, its current iteration has a less direct impact on many of the industry’s frontline occupations.

The chart compares relative AI exposure with projected employment growth from 2025 to 2035, illustrating that greater AI exposure does not necessarily correspond to faster or slower employment growth. Among construction occupations, construction managers and construction and building inspectors are the only two classified as having high relative AI exposure. Employment for these occupations is projected to grow 9% and remain essentially unchanged, respectively, from 2025 to 2035. By contrast, employment for solar photovoltaic installers, classified as having moderate exposure, is projected to grow 37%, making it the fastest-growing construction occupation in the group.

Among the selected construction occupations, the low-exposure group includes many hands-on trades and field roles, such as carpenters, construction laborers, roofers, and operating engineers. These jobs rely heavily on physical execution, changing jobsite conditions, safety judgment, coordination with other trades, and interaction with materials and equipment. These characteristics limit the direct reach of current software-based AI into many of the tasks performed in these roles. By contrast, construction managers and construction and building inspectors are classified as high-exposure exceptions, reflecting the greater role of planning, documentation, scheduling, compliance, reporting, and communication in these occupations. This distinction is consistent with findings from NAHB’s Housing Market Index (HMI) special questions, which show that builders primarily use AI for information-intensive tasks such as advertising and marketing, project planning, and project design. These findings complement the occupation-level AI exposure classifications, highlighting the greater applicability of AI to information-intensive functions than to hands-on construction activities.

Relatively low current AI exposure does not mean that construction is insulated from technological change. Instead, AI adoption may initially augment existing work through faster estimating and planning, improved document management, safety analysis, progress monitoring, and decision support. Changes to field operations may emerge more gradually through AI-enabled equipment, robotics, and computer vision. Recent findings from NAHB’s Housing Market Index (HMI) special questions show that builders identified technological advances as a positive long-term force for the housing industry.

Source:

U.S. Bureau of Labor Statistics, Employment Projections Program, “AI Exposure Categories and Employment Projections, 2025–35,” with definitions and limitations documented in the workbook’s Field Descriptions tab.

The BLS supplemental table, AI Exposure Categories and Employment Projections, 2025–35, combines five publicly available data sources to compare detailed occupations based on their theoretical and observed exposure to AI. The measure indicates whether AI technology could be, or has been, used to assist with or complete some tasks performed in an occupation. Importantly, it does not predict job losses, automation, productivity gains, or wage effects. This analysis focuses on 47 SOC construction occupations, excluding extraction occupations, plus construction managers. It does not represent the full workforce employed by construction firms, which also includes adjacent occupations such as architects, engineers, cost estimators, accountants, sales professionals, technology staff, and administrators. In addition, occupations are counted regardless of the industry in which workers are employed.



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Economic Growth Continued Across Most States in the Second Quarter – Eye On Housing

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Real gross domestic product (GDP) increased in 44 states and the District of Columbia in the second quarter of 2026, according to the latest estimates from the U.S. Bureau of Economic Analysis (BEA). State-level growth varied considerably during the quarter, with real GDP growth ranging from a 4.0% annualized increase in New York to a 2.3% decline in West Virginia. The results point to continued regional differences in economic performance, with most states recording positive economic growth despite ongoing pressures from elevated prices and interest rates.

Nationally, real GDP, measured at a seasonally adjusted annual rate, increased by 2.2% in the second quarter of 2026, led by real estate and rental and leasing, information, durable goods manufacturing, and finance and insurance. The leading offsets were decreases in transportation and warehousing, retail trade, and nondurable goods manufacturing.

Regionally, real GDP increased in all eight regions between the first and the second quarters of 2026. Growth was slightly less compared to the previous quarter, with regional gains ranging from a 1.5% increase in the Rocky Mountain region to a 2.9% increase in the Mideast.

New York posted the strongest increase in real GDP during the second quarter, with growth led by the finance and insurance industry. Delaware and South Carolina tied for second, each recording a 3.5% growth rate. Minnesota and Utah followed, with each posting a 3.4% growth rate. At the other end of the spectrum, West Virginia, Wyoming, Alaska, North Dakota, Kansas, and Nebraska recorded declines in real GDP. Mining was the leading contributor to the decreases in West Virginia and Wyoming. The divergence across states highlights the importance of industry composition in shaping regional economic performance, particularly for states with greater exposure to energy and commodity-related activity.

Overall, the state GDP data show that economic growth remained broad-based in the second quarter, although the pace of growth varied significantly across regions. For the housing market, differences in state-level economic activity can have important implications for housing demand, as stronger local economies generally support household income and employment, while weaker economic conditions can weigh on housing activity.



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PCE Inflation Remains Elevated – Eye On Housing

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The Federal Reserve’s preferred inflation gauge remained elevated in August, complicating the Fed’s path to its 2% target. Core PCE held at 3.0% year-over-year for the third consecutive month. Though the reading came in lower than expected, it’s not necessarily a sign of disinflation. The Bureau of Economic Analysis updated the PCE deflator methodology to better reflect household spending patterns, which likely trimmed the year-over-year increase. The revisions were applied retroactively through the first quarter of 2021. Meanwhile, the personal saving rate dropped to the lowest level in nearly four years, as persistent inflation offset wage growth while consumer spending accelerated.

The headline Personal Consumption Expenditure (PCE) Price Index increased 3.4% in August from a year ago, unchanged from last month, according to the Bureau of Economic Analysis. The “core” PCE price index, which excludes food and energy, rose 3.0% over the past twelve months, the same increase as last month. Core PCE has remained at or above 3.0% since the start of the Iran conflict, suggesting inflation pressure persists even excluding volatile energy prices.

Consumer spending rose 0.9% in August, and real spending, adjusted to remove inflation, increased 0.6%, the largest monthly increase since March 2025.

Meanwhile, personal income rose 0.2% in August. This growth was led by increases in compensation and government social benefits. Real disposable income—income adjusted for taxes and inflation—was unchanged. On a year-over-year basis, personal income was 4.3% higher, and real (inflation-adjusted) disposable income was up 1.3%.

With spending growth outpacing income growth, the personal saving rate fell to 4.1% in August, the lowest level since November 2022. The personal saving rate has been on a downward trend since the start of this year, with the exception of July.



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Consumer Confidence Fell in September – Eye On Housing

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Consumer confidence in September plunged to the lowest level since April 2014 as consumers grew more pessimistic about current conditions and the economic outlook. This report captured consumer sentiment following the Fed’s first rate hike since 2023 and ongoing geopolitical tensions. Consumer views of business conditions turned negative for the first time in two years, while the labor market outlook continued to worsen. The labor market differential, which measures the gap between consumers viewing jobs as plentiful and hard-to-get, remained narrow and reached its lowest level since February 2021.

The Consumer Confidence Index, reported by the Conference Board, is a survey measuring how optimistic or pessimistic consumers feel about their financial situation. This index fell from 89.4 to 81.9 in September, the lowest level since April 2014. The Consumer Confidence Index consists of two components: how consumers feel about their present situation and their expected situation. In September, the Present Situation Index decreased 11.9 points to 109.3, the lowest level since February 2021; the Expectation Situation Index declined 4.6 points to 63.6, marking a third consecutive monthly decline and the lowest level since April 2025. This is the twentieth consecutive month for which the Expectation Index has been below 80, a threshold that often signals a recession within a year.

Consumers’ assessment of current business conditions worsens in September. The share of respondents rating business conditions as “good” decreased by 0.4 percentage points to 18.5%, while those claiming business conditions as “bad” rose by 2.8 percentage points to 20.4%. Meanwhile, consumers’ assessments of the labor market were more negative in September. The share of respondents reporting that jobs were “plentiful” fell by 3.4 percentage points to 23.6%, the lowest level since February 2021; meanwhile, those who saw jobs as “hard to get” increased by 2.4 percentage points to 21.9%, the highest level since January 2021.

Consumers were more pessimistic about the short-term outlook. The share of respondents expecting business conditions to improve decreased from 16.8% to 15.9%, while those expecting business conditions to deteriorate increased from 23.1% to 25.4%. Meanwhile, expectations of employment over the next six months were more negative. The share of respondents expecting “more jobs” fell from 14.6% to 14.0%, and those anticipating “fewer jobs” rose by 2.3 percentage points to 28.4%.

The Conference Board also reported the share of respondents planning to buy a home within six months. The share of respondents planning to buy a home rose slightly to 5.4% in September. Of those, the shares planning to buy a newly constructed home and an existing home decreased to 0.4% and 2.4%, respectively. The remaining 2.6% were planning to buy a home but were undecided between new or existing homes.



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August Construction Job Openings – Eye On Housing

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The number of open positions in the construction sector fell back in August per the Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS). The current level of open jobs is down from three years ago due to declines in construction activity, particularly in housing. Nonetheless, strength in construction for subsectors like data center construction (up 46% year-over-year) is creating demand for construction workers. Further, increasing immigration enforcement actions is having an effect on worker availability, which is also contributing to the number of open positions.

The number of open jobs for the overall economy fell back in August, declining to 7.08 million. The August reading was lower than a year ago (7.34 million). Despite the decline, national job openings remaining in the 7 million range indicates that the labor market remains resilient to recent macro challenges, including higher energy prices.

The number of open construction sector jobs declined for the month, decreasing slightly from 299,000 in July to 251,000 in August. This total is higher than the total from a year ago (213,000). The chart below notes a declining trend for the construction job openings rate from 2023 to 2025 (after Fed tightening monetary policy) to a recent rising trend for open positions in construction, albeit with significant month to month noise.

While home building employment has declined over the last year, other sectors of the construction industry have expanded (e.g. data center construction). The industry also faces challenges in terms of no shows at work sites related to immigration enforcement.

The construction job openings rate declined to 2.9% in August, but is up from 2.5% from a year ago.

The construction hiring rate declined to 3.7% in August, down from the 4.1% rate estimated a year ago.

The layoff rate in construction was lower at 1.3% in August. The quits rate was flat at 2.2%.



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