KEY POINTS
• Builder sentiment dropped 4 points to 40 in October, and September’s read was revised down 1 point.
• This marks the third straight monthly decline in builder confidence.
• Sixty-two percent of builders reported offering sales incentives of all forms in October, up from 59% in September and tied with the previous high for this cycle set in December 2022
By Diana Olick | CNBC
Builder confidence in the market for single-family homes dropped to the lowest level since January, as builders contend with a market dominated by high mortgage rates and costs for financing.
The monthly National Association of Home Builders/Wells Fargo Housing Market Index dropped 4 points to 40 in October, and September’s read was revised down 1 point. Anything below 50 is considered negative. This marks the third straight monthly decline in builder confidence.
Builders point squarely to mortgage rates, which are now at a 23-year high. The average rate on the popular 30-year fixed mortgage has remained over 7% for two months. Affordability has fallen to near record lows.
“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’s chairman and a homebuilder and developer from Birmingham, Alabama. “Higher rates are also increasing the cost and availability of builder development and construction loans, which harms supply and contributes to lower housing affordability.”
