The National Association of Home Builders (NAHB)/Wells Fargo housing market index (HMI) for November plummeted by 8 points to 60 to end a five-month run in the high 60s range for. The HMI posted an 18-year high of 74 in December 2017. Economists polled by Bloomberg were expecting an index reading of 68.

Builders continue to report signs of consumer demand for new homes, but buyers are cautious due to rising interest rates and home prices.

The index is based on an NAHB monthly survey of homebuilder perceptions of current single-family home sales and expectations for sale in the next six months. An index reading above 50 indicates that more builders view sales conditions as good than view them as poor.

The current sales conditions sub-index for November fell by 7 points to 67and the sub-index that estimates prospective buyer traffic tumbled by 8 points to 45. The sub-index measuring sales expectations for the next six months plunged 10 points from 75 to 65.

The NAHB noted:

For the past several years, shortages of labor and lots along with rising regulatory costs have led to a slow recovery in single-family construction. While home price growth accommodated increasing construction costs during this period, rising mortgage interest rates in recent months coupled with the cumulative run-up in pricing has caused housing demand to stall. As a consequence, builders have adopted a more cautious approach to market conditions.

In the NAHB’s regions, three-month moving average indexes rose in two of four regions. The Northeast index score rose 2 points to 57. The average index fell in the association’s other three regions: in the Midwest, the index dropped 1 point to 57; in the South, the index dipped 2 points to 68, and in the West, the index dropped 3 points to 71.

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