Confidence among U.S. single-family homebuilders fell for the 10th straight month in October as soaring mortgage rates and ongoing supply chain challenges made new housing less affordable, particularly for first-time buyers.

Feeling the pressure from unsold inventory and unrealized profit margins, builders are slashing prices across a wide range of price points, geographies, and consumer groups.

Despite discounts and other buyer incentives, new home sales have fallen by 25% since January. As some homebuyers pull back and shelve their plans, the backlog of new homes for sale grows.

Single-family housing starts continued to fall in November, with the pace of construction down 32% since February when mortgage rates began to rise. For the last four months, there have been more single-family homes that completed construction than have been started.

Overall housing starts decreased 0.5% to a seasonally adjusted annual rate of 1.43 million units in November, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The November reading of 1.43 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Year-to-date, single-family starts are down 9.4%, mostly due to lack of demand, falling affordability conditions, and lingering supply-chain issues.

In addition, land-use restrictions, and a lack of public investment in roads, rail and other infrastructure make it harder for developers to find homebuilding sites. As most people want to live near cities, shortages in these areas become more pronounced.

A national index of homebuilder confidence plunged eight points in October to 38. Excluding the economic lockdown of spring 2020, this was the lowest reading since August 2012. A reading of 50 is a baseline marking the cutoff between a negative and positive outlook.

And with most current homeowners locked into mortgage rates well below currently prevailing rates, the number of existing homes for sale is likely to remain low, as well. Overall listings in October were up 40% from a year prior, but the number of new listings was down by 13%.

Housing has been the sector most affected by the Federal Reserve’s aggressive hikes to baseline interest rates in 2022. While aimed at cooling the economy to quash rising prices, the side effect is higher interest rates on consumer loans, including mortgages.

Rates on the 30-year home mortgage loan are at their highest since 2006 and home sales have tumbled by 25%. Higher rates intensify affordability challenges, especially for first-time buyers.

All signs suggest housing will be a considerable drag on growth into the fourth quarter. Given expectations for further Fed hikes, 2023 should see more declines.

The Fed’s efforts might yet bring prices down. Higher interest rates and construction costs are already weighing on the land market and other parts of the real-estate market are starting to slow.

Whether you call it a downturn, a correction, or a housing recession – the downward pressure on housing prices has already begun. The median home price fell to $379,100 in October, the fourth straight monthly decline after rising for more than two years. Fannie Mae forecasters expect prices to drop another 1.3% in 2023.