by Increased mortgage rates, rising energy and materials costs and a tight labor market all weigh on sentiment heading into the final months of the year
WASHINGTON — Builder confidence fell to a 14-year low this past month as homebuilders continue to work in an environment of increased mortgage rates along with a tightening labor market and rising energy and materials costs.
That was the message in the latest National Association of Home Builders/Wells Fargo Housing Market Index released late last month. The reading fell three points to 29, marking its lowest level since June 2012.
All three of the major HMI indexes had losses in October, including the index measuring current sales conditions, which fell two points to 33, while the index gauging future sales fell five points to 32. The index gauging prospective buyer traffic fell five points to 18.
Any number less than 50 indicates that more builders view conditions as poor versus good.
“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 homebuilder and remodeler from Worthington, Ohio, in a statement. “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.”
The housing market continues to face pressure based on affordability challenges and supply-side constraints, noted 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,” Dietz said. “As a result, buyer traffic has fallen to its lowest level since April 2012, excluding the pandemic’s onset in April 2020.”
The survey also noted that 43% of buyers cut prices last month, which it noted was the highest percentage from 2020 to 2026. The survey noted that the average price cut was 6% for the seventh consecutive month and that 65% of builders used sales incentives in October. This was the 19th straight month that builders reported having used incentives.
By region, three-month moving HMI scores were as follows:
+ The Northeast dropped one point to 38.
+ The Midwest fell three points to 40.
+ The South fell one point to 30.
+ The West declined two points to 26.
The good news for buyers is that the use of sales incentives and cost reductions is making houses more affordable in certain markets.
According to the U.S. Census Bureau, the median sales price of new homes was $400,400, 3.9% below $416,800 in September 2025 and 3.9% above $385,400 in August. By comparison, the average new home sale price was $472,800, 6.7% below $506,800 in September 2025 and .4% above $470,800 in August.
With median new home sales prices decreasing, this potentially leaves more money in the budget for furniture, appliances and other expenses. And while furniture will need to remain affordable, homebuyers may see more room to get what they want — including replacement furniture they may not have planned to buy — versus just the bare minimum in terms of what they can afford.
