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American home builders are more pessimistic than they’ve been in years about the housing market, but luxury housing is a bright spot in the economy.
An index of builder confidence in the market for newly built single-family housing dropped to its lowest level in 14 years, according to data the National Association of Home Builders and Wells Fargo released Monday.
The index dropped three points to 29 last month — the lowest level since June 2012.
Experts blamed factors from high mortgage rates and inflation to a challenging labor market for the house builders’ doldrums.
“The housing market is being squeezed by higher mortgage rates and an overall higher cost of living for prospective buyers, just as we enter the seasonally slower time of year for home sales,” Ali Wolf, a chief economist at housing data firm Zonda, told the Post.
Home sale prices across the country have been rising. Housing prices rose 2.1% from the second quarter of 2025 to the second quarter of this year, according to the Federal Housing Financial Agency.
With mortgage rates passing 7% in recent weeks, buyer traffic has been at a 14-year low even though there is large demand for housing.
“Higher mortgage rates, elevated construction costs and weaker consumer confidence are keeping more buyers on the sidelines,” said Robert Dietz, chief economist of the National Association of Home Builders in a statement. “As a result, buyer traffic has fallen to its lowest level since April 2012, excluding the pandemic’s onset in April 2020.”
Home builders are slashing rates to bring in buyers — over four in 10 builders lowered prices last month, according to the survey from the National Association of Home Builders, whose members build about 80% of new homes in the States.
“Builders have to find ways to keep homes selling. That typically comes in the form of price cuts and/or incentives,” Wolf said.
Things are a bit better in the Midwest, where single-family building permits are up 2.9% so far this year, according to the housing market index.
“When we look at housing demand across the country, the Midwest has been the strongest region in an otherwise slow market,” said Wolf. “Relative affordability, steady job growth, and access to developable land have all helped support growth.”
And luxury housing continues to draw big buyers — a possible symptom of what some economists consider a “K-shaped” economy,
More home builders have been shifting to the luxury market and buyers are paying all cash, the Wall Street Journal reported Monday.
One in four clients of luxury developer Toll Brothers have been paying cash, the company’s chairman Douglas Yearly told the Journal.
“Demand from luxury buyers remained relatively resilient,” he was quoted as saying.
Luxury home prices are rising faster than costs for a new starter home in 33 out of 50 US cities, the Journal noted.
Luxury housing is “outperforming the rest of the building sector,” Dietz said.
Nationwide, it will take about five years for housing costs to reach a “normal” level — defined in terms of mortgage payment versus income — according to a recent analysis from real estate company Redfin.