Builder sentiment decreased eight points to 38 in October, which is half of what it was six months ago; anything below 50 is considered negative for the National Association of Home Builders’ monthly survey, according to cnbc.com. It reached a record high of 90 in November 2020.
The drop marks the 10th straight decline for the NAHB/Wells Fargo Housing Market Index. It also has hit the lowest level since 2012, except for a brief drop at the beginning of the COVID-19 pandemic.
Of the homebuilder index’s three components, current sales conditions fell nine points to 45; sales expectations in the next six months decreased 11 points to 35; and buyer traffic fell six points to 25.
Homebuilders said rapidly rising interest rates have caused sentiment to fall. On Oct. 17, the average rate on the 30-year fixed mortgage was 7.12%—up from 3% at the beginning of 2022.
“High mortgage rates ... have significantly weakened demand, particularly for first-time and first-generation prospective home buyers,” said NAHB Chairman Jerry Konter. “This situation is unhealthy and unsustainable.”
NAHB Chief Economist Robert Dietz said this will be the first year since 2011 that there will be a decline for single-family starts.
