US Homebuilder Confidence Crashes To 14 Year Low, Blame Mortgage Rates & Immigration

American homebuilder confidence crashed to 29 in October – down from 32 in September and worse than the 31 print expected as rising mortgage rates, energy and material costs, and worsening labor and lot conditions have pushed builder sentiment to a 14-year low.

All three of the major HMI indices posted losses in October.

The index measuring current sales conditions fell two points to 33, the index gauging future sales expectations dropped five points to 32 and the index charting prospective buyer traffic fell five points to 18.

“Mortgage rates have climbed well above 7% in recent weeks, and higher gas prices and inflation have further weakened buyer traffic across much of the country,” said NAHB Chairman Bill Owens, a home builder and remodeler from Worthington, Ohio.

“Though builders are also contending with higher costs for construction loans, building materials and diesel, the Trump administration’s efforts to advance regulatory reform are helping to ease some of the cost pressures they face. 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.”

Judging by Future Sales expectations, builders are not going to be adding any new supply in a hurry…

“Housing remains squeezed by supply-side constraints and significant affordability challenges,” said NAHB Chief Economist Robert Dietz.

“Demand persists, but higher mortgage rates, elevated construction costs and weaker consumer confidence are keeping more buyers on the sidelines. As a result, buyer traffic has fallen to its lowest level since April 2012, excluding the pandemic’s onset in April 2020.”

The latest HMI survey found that 43% of builders cut prices in October, the highest share during the 2020-2026 period.

The average price cut remained at 6% for the seventh consecutive month. Meanwhile, 65% of builders reported using sales incentives in October, the 19th straight month at least 60% of builders have done so.

Looking at the three-month moving averages for regional HMI scores, the Northeast dropped one point to 38, the Midwest fell three points to 40, the South fell one point to 30 and the West posted a two-point decline to 26. 

However, as ugly as the data was, builder confidence has a long way to go before it catches down to homebuyer confidence…

Homebuyers have never been less enthusiastic about the American Dream… perhaps this is why…

The gap between current mortgage rates (7.5%) and the average mortgage across all of American homeowners (4.33%) is extreme to say the least, trapping sellers and buyers…

Who blinks first?