US homebuilder confidence fell to its lowest level in more than 14 years in October, with rising mortgage rates, expensive construction materials and labour shortages weighing on the housing market, according to a survey released on Monday.The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index slipped three points to 29, its weakest reading since June 2012. The decline was steeper than economists polled by Reuters had anticipated, with their forecast standing at 31.The Middle East conflict has pushed up energy prices and borrowing costs, adding to the financial pressure on builders. Mortgage rates have climbed alongside Treasury yields as the US-Israeli war with Iran fuels inflation. Freddie Mac data showed that the average rate on a 30-year fixed mortgage reached 7.40% last week, its highest level in nearly three years.Higher borrowing costs are weighing on home sales, while tariffs on imports have added to construction expenses. Builders are also facing labour shortages amid an immigration crackdown.“Builders are also contending with higher costs for construction loans, building materials and diesel, as well as persistent labor shortages,” said NAHB chairman Bill Owens. “Nationwide, more than one-third of builders reported immigration enforcement activity in their market areas during the past month, causing construction delays and discouraging legal workers from reporting to work.”
Price cuts and incentives rise as buyers hold back
Weak demand has left builders with a growing stock of unsold new homes, making them more reluctant to start construction on additional single-family housing projects.To attract buyers, 43% of builders reported reducing prices in October, the highest proportion recorded during the 2020-2026 period. The average price cut remained at 6% for the seventh consecutive month. Meanwhile, 65% of builders offered sales incentives, marking the 19th month in a row that at least 60% have resorted to such measures.The survey also showed deterioration across all three measures of housing market activity. The index measuring current sales conditions fell two points to 33, while expectations for sales over the coming months dropped five points to 32. Prospective buyer traffic also declined five points to 18.“Higher mortgage rates, elevated construction costs and weaker consumer confidence are keeping more buyers on the sidelines,” said Robert Dietz, NAHB chief economist. “As a result, buyer traffic has fallen to its lowest level since April 2012, excluding the pandemic’s onset in April 2020.”
Housing affordability remains a concern ahead of US midterms
The combination of high mortgage rates and persistently expensive homes has placed housing affordability at the centre of economic concerns ahead of the November 3 midterm elections, which will determine control of Congress.President Donald Trump earlier this year declined to sign a bipartisan bill aimed at improving housing affordability, dismissing it as “a big yawn”. He instead pressed Congress, including fellow Republicans who resisted his demands, to first pass separate and contentious voting requirements.The latest survey highlights the continuing challenges facing homebuilders as higher costs and subdued buyer demand affect their decisions on pricing, incentives and new construction.
