With mortgage rates nearly at 7% per Freddie Mac, home builders' confidence is starting to stumble. 

The , which was released Tuesday, showed that builder confidence for the newly built single-family housing market dropped six points to 50, after seven months of consecutive gains. NAHB chairman Alicia Huey, a custom home builder and developer from Birmingham, Ala., pointed to rising rates and high construction costs as re🌄asons for the plunge. 

“While this latest confidence reading is a reminder that housing affordability is an ongoing challenge, demand for new construction continues to be supported by a lack of resale inventory, as many homeowners elect to stay put because they are locked in at a low mortgage rate,” Huey s𝕴aid in a stat✤ement.

This latest iteration of the HMI survey found the share of builders turning to incentives to boost sales was 55% in August. That’s more than in July, when the share was 52%, but less than December 2022’s 62%. 

“D♛eclining customer traffic is a reminder of the larger challenge that shelter inflation is up 7.7% from a year ago and accounted for a striking 90% of the July Consumer Price Index reading of 3.2%,” NAHB chief economist Robert Dietz said in a statement. 

Dietz added the best way to address the affordability crisis, and the inflation that unde꧑rlies it, is to get the government involved. Enacting policies at all levels, he said, will let builders produce more homes, thereby helping to manage a nationwide shortfall of about 1.5 million housing units.

Regionally, the Northeast index went up four points to 56, the Midwest and South both ♑remained unchanged at 45 and 58 respectively, and the West went down one point to 50.

The NAHB/Wells Fargo HMI is derived from a monthly survey that has been conducted by NAHB for more than 35 years. The index measures builder perceptions of current single-family home sales and sales expectations, creating a seasonally adjusted outlook where any number higher than 50 is considered mostly positive.