October saw homebuilder confidence plunge to its lowest level in nearly a decade, driven by soaring mortgage rates, increased expenses for energy and building materials, and tightening labor and land availability. The latest NAHB/Wells Fargo Housing Market Index (HMI) showed a three-point decline to 29, marking the weakest reading since June 2012.
For the past 18 months, the HMI has stayed below the critical 40 threshold, signaling that a majority of builders perceive current market conditions as unfavorable rather than favorable.
NAHB chairman Bill Owens attributed the downturn to “Mortgage rates have climbed well above 7% in recent weeks, and higher gas prices and inflation have further weakened buyer traffic across much of the country.”
Labor shortages worsened further as one-third of builders reported immigration enforcement actions in their areas over the past month, contributing to project delays and discouraging lawful workers from attending job sites.
These findings align with Zonda’s recent builder survey, where 84% of respondents described demand as sluggish, with 60% calling the slowdown “causing concern.”
NAHB chief economist Robert Dietz explained that “Housing remains squeezed by supply-side constraints and significant affordability challenges,” noting that buyer interest has dropped to levels last seen in April 2012—before the pandemic disrupted the market in April 2020.
Reflecting affordability pressures, 43% of builders reduced home prices in October, the highest proportion in six years, while 65% offered incentives, maintaining a streak of 19 consecutive months with at least 60% of builders using promotions.
The HMI components also weakened: current sales conditions fell two points to 33, future sales expectations dropped five points to 32, and prospective buyer traffic declined five points to 18.
Across all four Census regions, the three-month moving average of HMI scores declined.
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