U.S. homebuilder confidence has fallen to its lowest point in a year as mortgage rates climb and buyers step back from the market. The National Association of Home Builders/Wells Fargo Housing Market Index dropped three points to 32 in September, the weakest reading since September 2025, according to a survey released Wednesday.
The decline reflects several pressures on the construction industry at once. Rising mortgage rates are the main driver, but builders also cite labor shortages tied to tighter immigration rules, higher material costs from import tariffs, and rising fuel prices. The survey’s measure of current sales conditions fell four points to 35, while its gauge of future sales dropped six points to 37.
The Mortgage Cost Problem
The 30-year fixed mortgage rate averaged 6.76% last week, the highest level in more than a year, up from 6.71% in the prior week, according to data from mortgage finance firm Freddie Mac. That rise has pushed potential buyers out of the market.
“Buyer traffic has weakened across much of the country, largely because of rising mortgage rates,” said NAHB chairman Bill Owens.
Owens added that builders also face “higher material costs, rising gas and diesel prices and persistent labor shortages.” He noted that “in some markets, builders report that increased immigration enforcement is discouraging legal workers from reporting to job sites.”
Why Buyers Are Waiting
Higher borrowing costs and still-elevated home prices are combining to keep buyers on the sidelines. The National Association of Realtors reported last week that sales of previously owned homes dropped to a 14-month low in August.
A glut of unsold new homes is also discouraging builders from starting new projects. The share of builders reporting that they are cutting prices rose to 38% this month from 35% in August.
Prices and Incentives
The average price reduction remained unchanged at 6% for the sixth straight month. The use of sales incentives rose to 66% from 63% in August.
The survey’s measure of prospective buyer traffic stayed flat at 23. A measure of current sales conditions dropped four points to 35, while its gauge of future sales tumbled six points to 37.
What Is Behind the Rates
Bond yields have risen amid concerns over the nation’s ballooning debt. The 10-year government bond yield reached 5.041% on Tuesday, the highest since July 2007. That rise was driven in part by expectations that the Federal Reserve would raise interest rates on Wednesday to quell inflation tied to the U.S.-Israel war with Iran. Longer-dated yields have also risen amid worries about the nation’s growing debt.
The war is a key factor in the broader economic picture. Inflation is rising, and the Fed’s expected rate hike is part of the response. Higher rates mean higher mortgage rates, which in turn discourage buying.
The Numbers at a Glance
| Measure | September Reading | August Reading | Direction |
|---|---|---|---|
| Housing Market Index | 32 | 35 | Down 3 points |
| Current Sales Conditions | 35 | — | Down 4 points |
| Future Sales | 37 | — | Down 6 points |
| Prospective Buyer Traffic | 23 | — | Flat |
| Price Reductions (share) | 38% | 35% | Up |
| Price Reductions (average) | 6% | — | Flat |
The Outlook
Sentiment is likely to remain subdued in the months ahead as mortgage rates have been rising in tandem with the 10-year U.S. Treasury yield. Economists polled by Reuters had forecast the index easing to 34.
The survey’s reading of 32 puts builder confidence at a 12-month low. That is a warning sign for the housing market, which has already seen sales of existing homes fall to a 14-month low.
What Comes Next
Builders are cutting prices and offering incentives to move inventory. The average discount of 6% has held steady for six straight months, and the share of builders doing price cuts has risen.
But the underlying problem is not temporary. Mortgage rates are near a one-year high, the war with Iran continues to drive inflation, and the federal debt is growing. Those factors are unlikely to ease quickly.
The survey’s measure of future sales dropped sharply, falling six points to 37. That suggests builders expect the weakness to persist, not improve.
The Bottom Line
Homebuilding confidence is at a 12-month low, and the forces pushing it down are not fading. Higher mortgage rates are the immediate cause, but they sit atop a pile of other problems: tariffs, labor shortages, immigration enforcement, and the cost of living.
The survey’s numbers are telling. Current sales conditions fell four points, future sales fell six, and buyer traffic held flat at 23. That is not a healthy mix.
The war with Iran is a factor in the inflation picture, and the Fed’s expected rate hike is part of the response. Higher rates mean higher mortgage rates, which in turn discourage buying.
Builder Owens summed up the situation bluntly: rising mortgage rates are weakening buyer traffic across much of the country. The other pressures — materials, fuel, labor, immigration — are making an already difficult environment even harder.
The result is a market where builders are cutting prices and offering incentives to move unsold homes. That is not a sign of strength.
The outlook is not bright. Mortgage rates are near a one-year high, the war with Iran continues to drive inflation, and the federal debt is growing. Those factors are unlikely to ease quickly.
Homebuilders are stuck between a rock and a hard place. They need buyers, but buyers need cheaper homes. The survey shows the tension clearly, and the direction is down.
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