U.S. Homebuilder Confidence Drops to 14-Year Low Amid Rising Mortgage Rates

The National Association of Home Builders/Wells Fargo Housing Market Index dropped three points to 29 in October, the lowest level recorded since June 2012, indicating that more builders view market conditions as poor than good. Each of the index's three components fell: current sales slipped to 33, six-month sales expectations fell to 32, and prospective buyer traffic dropped to 18, the lowest since April 2012. NAHB Chairman Bill Owens cited mortgage rates rising above seven percent, along with higher gasoline prices and inflation, as key factors reducing buyer traffic.

Chief Economist Robert Dietz added that supply-side constraints and affordability challenges continue to squeeze the market. Builders are responding with price reductions, averaging six percent for the seventh month in a row, and many are offering sales incentives for the nineteenth consecutive month. A recent NAHB survey also showed a median 4.2 percent rise in labor costs year over year, with Florida contractors increasing pay and offering recruiting bonuses amid labor shortages.