According to the National Association of Homebuilders (NAHB)/Wells Fargo Housing Market Index (HMI) released this week, builder confidence in the market for newly built single-family homes fell three points in September to 46—marking nine consecutive months of decline. Aside from the spring of 2020, when the COVID-19 pandemic stalled nearly everything in the U.S., the current level is the lowest measured by the index since May 2014.

“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households,” said Jerry Konter, a home builder and developer from Savannah, Ga. “In another indicator of a weakening market, 24% of builders reported reducing home prices, up from 19% last month.”

Derived from a monthly survey that NAHB has conducted for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months; the survey also asks builders to rate traffic from prospective buyers. Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The decline was seen across all three HMI components in September. Current sales conditions dropped three points to 54, sales expectations in the next six months declined one point to 46 and traffic of prospective buyers fell one point to 31.

The three-month moving averages for regional HMI scores also saw a decrease in confidence, though declines in the Northeast (five points) and the South (seven points) both stayed within the “good” range at 51 and 56, respectively. The Midwest dropped five points to 44 and the West posted a 10-point decline to 41.

An NAHB press release about the decline points to factors such as the combination of elevated interest rates, persistent supply chain disruptions for building materials and high home prices—all of which impact affordability.

“Builder sentiment has declined every month in 2022, and the housing recession shows no signs of abating as builders continue to grapple with elevated construction costs and an aggressive monetary policy from the Federal Reserve that helped push mortgage rates above 6% last week, the highest level since 2008,” said NAHB chief economist Robert Dietz. “In this soft market, more than half of the builders in our survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions.”

HMI tables can be found HERE. More information on housing statistics is also available at Housing Economics PLUS (formerly housingeconomics.com).