Persistently high mortgage rates are taking their toll on home builder sentiment, sending U.S. home builder confidence to a seven-month low, CNBC reports. The National Association of Home Builders/Wells Fargo Housing Market Index declined by 5 points in September following a 6-point drop in August, reaching a reading of 45. According to the index, any reading below 50 is considered negative.
Builders are concerned about weaker affordability caused by elevated mortgage rates, which have remained above 7% since June. As a result, more builders are offering homebuyers incentives, with 32% of builders reporting price cuts in September, the highest share since December 2022.
“High mortgage rates are clearly taking a toll on builder confidence and consumer demand, as a growing number of buyers are electing to defer a home purchase until long-term rates move lower,” said Robert Dietz, NAHB’s chief economist, in a release.
“On the supply-side front, builders continue to grapple with shortages of construction workers, buildable lots and distribution transformers, which is further adding to housing affordability woes. Insurance cost and availability is also a growing concern for the housing sector,” said NAHB Chairman Alicia Huey, a homebuilder and developer from Birmingham, Alabama.