That decline matched the forecast of economists surveyed by the Wall Street Journal.

One year ago, the index stood at 81. The June reading of 67 was the lowest since June 2020.

Key details: The three gauges that underpin overall builder confidence index also experienced drops, including the gauge that measures current sales conditions, which fell by one point, and the component that tracks traffic of prospective buyers, which fell by five points, and the gauge that assesses sales expectations for the next six months fell by two points.

Regionally, the picture was grim across the board: Home builder confidence fell the most in the West by nine points, the Midwest by six points, followed by a two-point drop in the South and a one-point drop in the Northeast.

Big picture: The housing market is in the midst of a broader slowdown, amid rising mortgage rates. The average rate for a 30-year fixed-rate mortgage rose 25 basis points, from 5.4% to 5.65% for the week ending June 10, according to the Mortgage Bankers Association. Rates are at the “highest level since 2008,” Joel Kan of MBA said.

Mortgage rates are expected to continue to climb as the Federal Reserve moves to tighten monetary policy to control inflation.

Later Wednesday, the U.S. Federal Reserve raised the benchmark interest rate by 0.75 percentage point, the biggest increase since 1994 as it tries to tame rising inflation from a 40-year high.

What the NAHB said: “Six consecutive monthly declines for the HMI is a clear sign of a slowing housing market in a high inflation, slow growth economic environment,” NAHB Chairman Jerry Konter, a builder and developer from Savannah, Ga., said in a press release.

“The entry-level market has been particularly affected by declines for housing affordability and builders are adopting a more cautious stance as demand softens with higher mortgage rates,” he added.

Market reaction: The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.306%
was below 3.4% on Wednesday. The 10-year hit a 52-week high on Tuesday. The SPDR S&P Homebuilders ETF
XHB,
+0.34%
rose more than 1% in early trading on Wednesday morning.

Shares of D.R. Horton, Inc.
DHI,
-0.43%
and Lennar Corp
LEN,
-0.25%
are both down 40% year-to-date. PulteGroup Inc.
PHM,
-1.13%
is down by 30% YTD; Toll Brothers Inc.
TOL,
+0.02%
is down over 38%.

What are they saying? “We expected a bigger hit, but this is not the floor,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note on Wednesday. “Mortgage demand is in free-fall, and the NAHB index will drop much further over the summer.”

With mortgage applications also dropping from December highs, Shepherdson said that inventory levels and new home sales data all point to signs of a further drop in prices and new construction activity.

“This is still the early stages of the housing rollover; homebuilders are not yet ready to admit that the sky is falling in,” he stated. “But it is.”