US Homebuilder Sentiment Falls to Its Lowest Since 2012 as Mortgage Rates Top 7 Percent

US homebuilder confidence fell sharply in October, dropping to a level last seen in June 2012, as mortgage rates above 7 percent, higher building costs and a shortage of workers weighed on the market for new single-family homes.

The National Association of Home Builders (NAHB) and Wells Fargo Housing Market Index fell three points to 29 in October, the NAHB said on Monday, October 19, 2026. Economists polled by Reuters had expected a reading of 31. Any number below 50 means more builders see conditions as poor than good.

Rates are keeping buyers away

Mortgage rates have climbed in recent weeks as the Middle East conflict pushed up Treasury yields and the price of energy-related building materials, Reuters reported. The average 30-year fixed mortgage rate was 7.40 percent last week, the highest in nearly three years, according to Freddie Mac figures cited by Reuters.

"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 builder and remodeler from Worthington, Ohio.

All three parts of the index fell. Current sales conditions dropped two points to 33, expectations for sales over the next six months fell five points to 32, and traffic of prospective buyers fell five points to 18. NAHB chief economist Robert Dietz said buyer traffic was now at its lowest since April 2012, apart from the start of the pandemic in April 2020. "Demand persists, but higher mortgage rates, elevated construction costs and weaker consumer confidence are keeping more buyers on the sidelines," Dietz said.

Builders are cutting prices

With buyers holding back, builders are discounting. The survey found 43 percent of builders cut prices in October, the highest share in the 2020 to 2026 period, while the average cut stayed at 6 percent for a seventh straight month. About 65 percent of builders used sales incentives, the 19th straight month in which at least 60 percent did so.

Weak demand has left builders holding unsold new homes, which makes them less willing to start more single-family projects, Reuters reported.

Labor and costs add pressure

Builders also face higher costs for construction loans, building materials and diesel, and persistent labor shortages. More than one third of builders told the survey that immigration enforcement activity in their market areas during the past month had caused construction delays and discouraged legal workers from reporting to work. Reuters said the decline in sentiment also reflected rising costs linked to tariffs on imports.

Regional readings fell across the country on a three-month moving average. The Northeast dropped one point to 38, the Midwest fell three points to 40, the South fell one point to 30 and the West fell two points to 26. The NAHB said the Midwest was a relative bright spot, with single-family permits up 2.9 percent.

Housing costs sit at the center of the affordability debate heading into the November 3 midterm elections, which will decide control of Congress. Reuters reported that President Donald Trump earlier this year refused to sign a bipartisan housing affordability bill, calling it "a big yawn," as he pressed Congress to pass separate voting requirements first. Owens said the administration's regulatory reform efforts were helping to ease some cost pressures on builders.