WASHINGTON, Oct 19 (Reuters) – US homebuilder sentiment plunged to the lowest level in nearly 14-1/2 years in October as the Middle East conflict boosted mortgage rates and prices of energy-related building materials, a survey showed on Monday.
The National Association of Home Builders/Wells Fargo Housing Market index dropped three points to 29 this month, the lowest level since June 2012. The decline also reflected labor shortages amid an immigration crackdown as well as rising costs because of tariffs on imports.
Economists polled by Reuters had forecast the index dipping to 31.
Mortgage rates have surged in recent weeks, with the 30-year fixed rate averaging 7.40% last week, the highest level in nearly three years, data from mortgage finance firm Freddie Mac showed. The higher borrowing costs, which are tracking Treasury yields as the US-Israeli war with Iran fans inflation, are depressing home sales.
“Builders are also contending with higher costs for construction loans, building materials and diesel, as well as persistent labor shortages,” said NAHB chairman Bill Owens. “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.”
Sagging demand has left homebuilders with excess inventory of unsold new homes on the market, also discouraging them from breaking ground on new single-family housing projects.
Rising mortgage rates and still-high home prices have put the housing market at the center of what economists call an affordability crisis heading into the November 3 midterm elections, which will determine control of Congress.
President Donald Trump earlier this year refused to sign a bipartisan housing affordability bill, calling it “a big yawn” as he pressed Congress, including fellow Republicans resisting his demands, to first pass separate and contentious voting requirements.
The share of builders reporting cutting prices to attract buyers jumped to 43% in October, the highest share during the 2020-2026 period. The average price reduction was unchanged at 6% for the seventh straight month. The use of sales incentives was at 65%, the 19th consecutive month that at least 60% of builders have done so.
The survey’s measure of current sales conditions fell two points to 33, while its gauge of future sales dropped five points to 32. A 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. “As a result, buyer traffic has fallen to its lowest level since April 2012, excluding the pandemic’s onset in April 2020.”
(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama )
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