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- Homebuilder confidence dropped to its lowest point since January 2023, the NAHB said Tuesday.
- Stubbornly high mortgage rates have taken a toll on builder sentiment, the group said.
- Builder confidence in October fell for the third consecutive month of declines.
Homebuilder confidence just plunged to its lowest mark in 10 months, the National Association of Home Builders announced on Tuesday.
In what marks the third consecutive month of declines, the NAHB/Wells Fargo Housing Market Index (HMI) dipped four points from a revised September reading to 40. The group cited stubbornly high mortgage rates as the primary drag on confidence. On Tuesday, rates on the 30-year fixed mortgage hit 7.92%, according to Mortgage News Daily's index.
"Builders have reported lower levels of buyer traffic, as some buyers, particularly younger ones, are priced out of the market because of higher interest rates," said Alicia Huey, NAHB Chairman. "Higher rates are also increasing the cost and availability of builder development and construction loans, which harms supply and contributes to lower housing affordability."
The sentiment survey gauges builders' current view and six-month outlook on home sales and buyer traffic. A rating over 50 indicates more respondents see conditions as good than poor.
Climbing mortgage rates have coincided with the Federal Reserve's aggressive rate-hiking campaign since last year, and there's little relief in sight as central bankers have signaled that policy will remain restrictive for the foreseeable future.
Many builders have moved to reduce home prices in a bid to boost sales. This month, 32% of builders reported dropping prices, the NAHB said. That's the highest rate since December, and the average price discount is at about 6%.
At the same time, 62% of builders offered sales incentives of all forms in October, up from 59% the month prior.
Buyers and sellers alike have largely been kept on the sidelines as mortgage rates hover near multi-decade highs and moving homes looks unattractive. Housing affordability can only ease with an influx of new home inventory, in NAHB chief economist Robert Dietz' view.
"Boosting housing production would help reduce the shelter inflation component that was responsible for more than half of the overall Consumer Price Index increase in September and aid the Fed's mission to bring inflation back down to 2%," Dietz said Tuesday. "However, uncertainty regarding monetary policy is contributing to affordability challenges in the market."