Last week, the U.S. Federal Reserve announced that its Open Market Committee (FOMC) decided to lower the target range for the federal funds rate by 0.25 percentage points, to between 4% and 4.25%. Meanwhile, according to National Association of Home Builders (NAHB), August 2025 was the lowest reading for private housing starts since July 2024 for single-family home building.
“Housing affordability is hurting buyer traffic for builders, and as a result builders have slowed single-family home construction,” said NAHB chairperson Buddy Hughes. “Nonetheless, our latest survey shows builders reported an increase for future market expectations as mortgage rates have posted a modest decline in recent weeks.”
Prior to the Federal Reserve announcement, the U.S. Department of Housing and Urban Development and the U.S. Census Bureau reported that privately-owned housing units authorized by building permits in August were 3.7% below the revised July rate and 11.1% below the August 2024 rate. Single-family authorizations in August were down 2.2% over July as well, while privately-owned housing starts in August were reported to be 8.5% below the revised July estimate and 6% below the August 2024 rate. Single-family housing starts in August were 7% below the revised July figure.
Then came the FOMC’s vote, which Federal Reserve Chair Jerome Powell is said to have called a “risk management cut” — a move meant to guard against growing uncertainty, rather than a response to a clear economic downturn, NAHB officials suggested. They believe that markets expected the move, and much of the impact was already priced in. They cite mortgage rates as an example, which they indicated have already dropped slightly, with the average 30-year fixed now at 6.35%, down 20 basis points over the past month. The 10-year Treasury yield barely moved after the Fed’s announcement, reflecting how little surprise the NAHB leadership says the decision carried.
But what does it mean for housing, and—specifically—builders and suppliers of building products? NAHB officials said the rate cut will have a direct, beneficial impact on builders, especially those relying on acquisition, development, and construction (AD&C) loans. The loans are key to getting new homes built, particularly by private builders, who, according to NAHB, construct more than 60% of the country’s single-family homes. Lower borrowing costs for builders could help ease housing supply constraints across the country, they suggest.
Powell acknowledged that the housing market remains weak and noted that many of the issues — such as high regulatory costs and a persistent housing shortage — can’t be solved by monetary policy alone. NAHB leadership say that the Fed’s actions still should offer some relief on the financing side.
Inflation is expected to gradually decline, but the Fed doesn’t see its 2% target being met until 2028 — highlighting how persistent inflation pressures continue to be.