Confidence among U.S. homebuilders fell sharply in October, dropping to its lowest level in 14 years as mortgage rates climbing well above 7 percent kept buyers on the sidelines and pushed more builders to slash prices.
The National Association of Home Builders/Wells Fargo Housing Market Index fell three points to 29, the National Association of Home Builders said Monday. That is the weakest reading since June 2012 and below the 31 that economists surveyed by Bloomberg and The Wall Street Journal had expected. Any reading under 50 means more builders view conditions as poor than good.
Every component of the index declined. Current sales conditions dropped two points to 33, also the lowest since 2012. Builder expectations for sales over the next six months fell five points to 32, the weakest showing since November 2022. Buyer traffic through model homes fell five points to 18, the lowest reading since April 2012 outside of the pandemic shock in April 2020.
NAHB Chairman Bill Owens said mortgage rates have pushed well above seven percent in recent weeks, while rising gasoline prices and inflation have further discouraged shoppers from walking through the door. He added that builders themselves are facing steeper costs for construction loans, building materials and diesel fuel.
“Housing remains squeezed by supply-side constraints and significant affordability challenges,” said NAHB Chief Economist Robert Dietz.
Facing a tougher selling environment, builders are cutting prices at a pace not seen since the start of the decade. Forty-three percent reported price cuts in October, the highest share recorded between 2020 and 2026, with the average reduction holding at six percent for a seventh straight month. Sixty-five percent of builders also reported using sales incentives such as rate buydowns or upgrades, marking 19 consecutive months in which at least 60 percent have resorted to such measures.
Florida Labor Costs Climbing
A separate NAHB survey from September, released last week, found that builders’ labor costs rose a median of 4.2 percent over the prior year nationwide. That report specifically noted that contractors in Florida have been raising pay and offering recruiting bonuses as skilled crews become harder to find, adding to the cost pressures squeezing builders in one of the nation’s fastest-growing states.
Owens credited the Trump administration’s deregulatory efforts with helping offset some of those rising costs for builders, even as high rates continue to weigh on overall confidence in the sector.
