“We are hearing from builders that consumer demand exists, but that customers are hesitating to make a purchase because of rising home costs,” said NAHB Chairman Randy Noel, a homebuilder from LaPlace, Louisiana. “However, recent declines in mortgage interest rates should help move the market forward in early 2019.”

The decline in builder confidence comes as rising costs for materials is preventing them from breaking ground on new projects. Moreover, demand is outpacing supply in most market segments, driving up prices even further–thus, pricing out prospective home buyers.

“The fact that builder confidence dropped significantly in areas of the country with high home prices shows how the growing housing affordability crisis is hurting the market,” said NAHB chief economist Robert Dietz. “This housing slowdown is an early indicator of economic softening, and it is important that builders manage supply-side costs to keep home prices competitive for buyers at different price points.”

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