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US homebuilder confidence plunged in October to its lowest level in nearly 14 and a half years, battered by higher mortgage rates, rising construction expenses and persistent labor shortages. The decline added fresh evidence of severe strain across the housing market.

The National Association of Home Builders and Wells Fargo Housing Market Index fell three points to 29 during the month. That was the weakest reading since June 2012 and fell below the 31 forecast by economists surveyed by Reuters.

The Middle East conflict has pushed up mortgage rates and the prices of building materials tied to energy costs, according to the survey. Tariffs on imports have also raised expenses, while an immigration crackdown has intensified labor shortages affecting builders.

Mortgage rates surged in recent weeks, further limiting buyers already confronting elevated home prices. Data from mortgage finance company Freddie Mac showed that the average rate on a 30 year fixed mortgage reached 7.40% last week, its highest level in nearly three years.

Those borrowing costs have tracked Treasury yields as the war involving the United States, Israel and Iran has fueled inflation. The resulting pressure on household financing has depressed home sales and weakened the market for newly built properties.

"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."

Weak demand has left builders carrying excess inventories of new homes that have not sold. That growing supply has also discouraged companies from breaking ground on additional single family housing projects.

Housing affordability has become a central economic concern heading into the November 3 midterm elections, which will determine control of Congress. Higher mortgage rates and home prices that remain elevated have combined to keep ownership beyond the reach of more potential buyers.

President Donald Trump earlier this year declined to sign a bipartisan housing affordability bill, dismissing it as "a big yawn." He instead pressed Congress, including Republicans resisting his demands, to approve separate and contentious voting requirements first.

Builders are increasingly cutting prices in an effort to draw reluctant buyers back into the market. The share reporting price reductions climbed to 43% in October, the highest level recorded during the period from 2020 through 2026.

The average reduction remained at 6% for the seventh consecutive month. Although builders were cutting prices more frequently, the typical size of those reductions did not grow.

Sales incentives also remained widespread, with 65% of builders saying they used them. October marked the 19th consecutive month in which at least 60% of builders reported offering incentives to encourage purchases.

Every major component of the survey weakened during the month. The measure of current sales conditions slipped two points to 33, while the gauge tracking future sales expectations dropped five points to 32.

Prospective buyer traffic suffered an even sharper setback, tumbling five points to 18. That reading illustrated how rising financing costs and fading confidence have kept potential purchasers away despite builders offering discounts and other incentives.

"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."

The October survey presented a housing industry squeezed from both directions. Builders faced more expensive loans, materials, diesel and labor constraints, while buyers confronted mortgage rates at nearly a three year high and home prices that remained difficult to afford.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.