US homebuilder confidence falls to 29, its lowest since 2012

The NAHB/Wells Fargo Housing Market Index, which measures US builders' confidence in the market for newly built single-family homes, fell three points to 29 in October, its lowest reading since June 2012.^[1][2] A reading below 50 means more builders view conditions as poor than good; the index measures sentiment, not the number of homes sold.

Higher mortgage rates are keeping more buyers on the sidelines, forcing some builders to cut prices.^[3] Discounts can help close sales, but they leave less profit per home unless land, labor and material costs fall as well.

Long-term rates remain a hurdle: the 10-year US Treasury yield stood at 5.15% on October 19, up six basis points, or 0.06 percentage point, from 5.09% on October 16. Mortgage rates generally respond to this benchmark, though not one-for-one. If demand stays weak, builders may start fewer homes, reducing orders for building materials and construction services; the confidence decline alone does not establish that such a slowdown has happened.

Impact

• HomebuildersRisk

  More builders are cutting prices to attract buyers deterred by high mortgage rates. That may preserve some sales but squeeze profit per home and pressure competing builders in the same markets to match discounts.^[3]

• Building materials and residential construction servicesRisk

  Material suppliers and construction contractors could receive fewer orders if weak demand leads builders to slow new projects. This is a potential consequence of weaker confidence, not an order decline established by these reports.^[2][3]

What to watch next

• September building permits and housing starts, due October 20, will show whether weak sentiment was also reflected in the prior month's project plans and actual construction.
• September pending home sales, due October 20, will help test whether buyer demand is weak more broadly, though the release does not directly measure new-home sales.
• The MBA 30-year mortgage rate for the week ending October 16, due October 21, will show whether financing pressure is easing; the previous reading was 7.5%.