According to the latest statistics, the builder confidence index fell by 4 percentage points in October, marking the third consecutive month of decline.

The National Association of Home Builders (NAHB) and Wells Fargo Housing Market Index for the quarter showed that the index dropped to 40 in October, with any number below 50 representing a pessimistic sentiment in the industry. This data suggests that even builders are expressing concerns about the current US real estate market.

Builders have explicitly stated that the surge in mortgage rates is the primary reason for the decline in confidence. Currently, the average 30-year fixed mortgage rate has remained above 7% for the past two months, reaching a new high not seen in 23 years.

This has not only diminished the purchasing power of potential buyers, especially younger homebuyers, but has also increased the costs for builders and their ability to handle development loans. Furthermore, the high rates have led to a shortage in real estate supply, further reducing the affordability for homebuyers.

Alicia Huey, a spokesperson for NAHB, indicated that builders are recognizing the issue of reduced buyer traffic, especially as young homebuyers are being forced out of the market due to the high rates.

Simultaneously, the high mortgage rates have increased costs for builders and the burden of development loans, further weakening the supply capacity of the real estate market and the affordability for homebuyers.

Based on the three components of the index, the recent sales conditions index dropped by 4 percentage points to 46, the index for expectations of sales over the next six months fell by 5 percentage points to 44, and the buyer traffic index declined by 4 percentage points to 26. These data all indicate that the current real estate market is facing significant challenges, with buyer enthusiasm notably restrained.

To attract buyers back, builders have been introducing more incentives. Approximately 62% of builders reportedly offered various forms of incentives in October, an increase from September. These include policies such as reduced mortgage rates. Builders hope that these measures will stimulate demand for home purchases and increase market activity.