Four in ten home builders cut their prices in October. The buyers still didn't come. The NAHB/Wells Fargo index of builder confidence fell three points to 29, its lowest since June 2012. Economists had expected 31. Dean Seal reported the numbers in Tuesday's Journal.
NAHB chairman Bill Owens laid out the causes on Monday, Oct. 19. Mortgage rates well above 7% are keeping buyers away. So are higher gas prices and inflation. Builders face their own rising costs, for construction loans, materials and diesel. Buyer traffic is the lowest since April 2012, if you set aside the first month of the pandemic. The index of future sales fell five points to 32. The traffic index fell five, to 18.
The price cuts tell the same story. The share of builders cutting rose to 43%, the most since 2020. The average cut held at 6% for the seventh month running. A little under two-thirds are offering incentives, such as paying closing costs or buying down your rate. That figure has stayed above 60% for 19 months in a row. Housing "remains squeezed," said Robert Dietz, the NAHB's chief economist.
The labor problem on the job site
The newest cost is labor, and Monday's Journal spelled it out. Nearly two-thirds of builders say immigration enforcement is affecting their workforce, up from 23% in March, by a John Burns survey. Immigrants were 26% of construction workers in 2024, a record, by NAHB's count. In Jacksonville, Fla., builder Scott Brannock says framers who earned about $20 an hour now get $40 to $45. Framing labor on an average 2,500-square-foot house used to run $10,000. Now it runs $25,000 to $28,000. In Indiana, one builder estimates up to 25% of the residential workforce is gone. The NAHB's September survey found labor costs up a median 4.2% from a year earlier.
The paper gave both sides room. Enforcement advocates, including the Federation for American Immigration Reform, say deportations lower housing costs by easing demand for homes. They say builders should hire U.S. citizens. Homeland Security says the operations target illegal hiring networks that undermine American workers. A Jacksonville subcontractor says nobody is lining up for the jobs. Owens said the enforcement has also kept legal workers from showing up. A house gets built in order, so one missing crew can stall the whole lot.
Our read
Housing (M6). We wrote about Lennar's incentives on Oct. 14. This week's numbers say the leverage has shifted further toward the buyer. The builder's cost to deliver is rising at the same time. That squeezes margins, and it helps explain why the confidence index sits where it did in 2012. In the model books, D.R. Horton (DHI) and Lennar (LEN) are each held at weight in 1 book; nothing added. Home Depot (HD) sits in 8 books and Lowe's (LOW) in 6, held at weight. None of this is a call on the stocks. It's a read on the ground.
If a new build is in your plan, the check this week is the incentive sheet. A 6% cut on the sticker and a rate buydown worth the same money aren't the same deal. The price cut lowers what you owe for good. A temporary buydown ends after a year or two. Ask the builder to show you both in dollars, over the first three years and over the life of the loan. Then read the contract's delay clause. With framing crews short, finish dates can slip, and a slipped date can push you past your rate lock. The roof gets checked before the rain, and so does the contract.