The monthly National Association of Home Builders/Wells Fargo Housing Market Index dropped four points to 40 in October, and September’s read was revised down one point. Anything below 50 is considered negative. This marks the third straight monthly decline in builder confidence.
Builders point squarely to mortgage rates, which are now at a 23-year high. The average rate on the popular 30-year fixed mortgage has remained over 7% for two months. Affordability has fallen to near record lows.
Of the index’s three components, current sales conditions fell four points to 46, sales expectations in the next six months dropped five points to 44, and buyer traffic dropped four points to 26.
In order to get buyers in the door, builders are using more incentives again. This includes buying down mortgage interest rates. About 62% of builders reported offering sales incentives of all forms in October, up from 59% in September and tied with the previous high for this cycle set in December 2022.
In addition, 32% of builders said they cut home prices. That is unchanged from the previous month but still the highest rate since December (35%). The average price discount is steady at 6%.
