US homebuilder sentiment plunged to its lowest level in nearly 14 and a half years in October as the ongoing Iran war pushed up mortgage rates and prices of energy-related building materials.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index fell three points to 29 this month, its lowest reading since June 2012.
The decline also reflected labour shortages amid an immigration crackdown and rising costs linked to Trump tariffs on imports.
As per the mortgage finance firm Freddie Mac, rates have surged recently, with the average 30-year fixed rate reaching 7.40% last week, the highest level in nearly three years.
Higher borrowing costs, which have tracked Treasury yields as the Iran war fuels inflation, are weighing on home sales.
“Builders are also contending with higher costs for construction loans, building materials and diesel, as well as persistent labour shortages,” said NAHB Chairman Bill Owens.
He added that more than one-third of builders nationwide had reported immigration enforcement activity in their market areas over September, causing construction delays and discouraging legal workers from reporting to work.
“Weak demand has left homebuilders with excess inventories of unsold new homes, discouraging them from starting new single-family housing projects,” Owens said.
Rising mortgage rates and persistently high home prices have placed the housing market at the centre of what economists describe as an affordability crisis ahead of the November 3 midterm elections, which will determine control of Congress.
US President Donald Trump earlier this year refused to sign a bipartisan housing affordability bill, calling it “a big yawn.”
The Republican instead pressed Congress to pass separate and contentious voting requirements first.
As per the index, builders are increasingly relying on price cuts and sales incentives to attract buyers as affordability pressures keep demand subdued.
“The share of builders reporting price reductions jumped to 43% in October, the highest level recorded during the 2020-2026 period. The average price reduction remained unchanged at 6% for the seventh consecutive month,” NAHB said.
“Meanwhile, 65% of builders reported using sales incentives, marking the 19th consecutive month in which at least 60% had done so,” it added further.
The survey’s measure of current sales conditions fell two points to 33, while its gauge of future sales dropped five points to 32. The measure of prospective buyer traffic tumbled 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.
He added that buyer traffic had fallen to its lowest level since April 2012, excluding the onset of the COVID pandemic in April 2020. Its gauge of future sales dropped five points to 32. The measure of prospective buyer traffic tumbled 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.
He added that buyer traffic had fallen to its lowest level since April 2012, excluding the onset of the COVID pandemic in April 2020.