Builder Confidence Hits Lowest Level Since 2012

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) dropped three points to 29 in October--its lowest level in 14 years. As per usual, higher mortgage rates, rising costs, and worsening labor and lot conditions were the driving factors.  All three component indices declined, with prospective buyer traffic suffering the steepest drop. HMI Component September October Change Current sales conditions 35 33 -2 Sales expectations 37 32 -5 Prospective buyer traffic 23 18 -5 "Buyer traffic has now fallen to its lowest level since April 2012, excluding the initial pandemic shock in April 2020.” said NAHB Chairman Bill Owens. Builders are also facing higher construction loan, material and diesel costs, along with construction delays tied to immigration enforcement activity. Builders have responded by continuing to slash prices. The share reporting price cuts climbed to 43% in October, the highest level during the 2020-2026 period. The average reduction remained at 6% for the seventh consecutive month. Sales incentives were reported by 65% of builders, marking the 19th straight month that at least 60% have offered them.