Homebuilder sentiment dropped three points to 29 in October, a 14-year low, and 43% of builders responded by cutting their prices.
By the numbers: The NAHB/Wells Fargo Housing Market Index fell to 29, where any reading above 50 means more builders see conditions as good than poor. The average price cut held at 6% for a seventh consecutive month, and 65% of builders used sales incentives, the 19th straight month above 60%.
- Buyer traffic fell to its lowest level since April 2012, excluding the onset of the pandemic in April 2020, according to the survey.
What they're saying: "Demand persists, but higher mortgage rates, elevated construction costs and weaker consumer confidence are keeping more buyers on the sidelines," NAHB chief economist Robert Dietz said.
Zoom in: Mortgage rates finally eased on Wednesday. The average 30-year fixed contract rate slipped to 7.41% from 7.50%, its first weekly decline in over two months, per the Mortgage Bankers Association.
- Application volume still fell 5.3% for the week. Purchase applications dropped 7% and sit 18% below a year ago, while refinances fell 2% and sit 59% below last year.
Between the lines: NAHB chairman Bill Owens said 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.
Yes, but: The National Association of Realtors reported a sharp drop in September pending home sales on Tuesday, a real-time read on signed contracts, and rates stayed at the higher level through October.
Why it matters: Buyers who can carry a 7% rate have the most leverage since 2012: two in five builders are discounting and two in three are offering incentives. Both are negotiable on new construction, so ask for the concession in writing before you sign.
