Home builders are piling on incentives to entice increasingly hesitant homebuyers into a deal.

Almost 1 in 4 home builders reported reducing their price this month, up from 19% in August, according to a monthly survey and index from the National Association of Home Builders, while half said they offered mortgage rate buy-downs and free amenities, among other inducements to close sales.

As a result, builders' confidence worsened for the ninth straight month, with sentiment in September falling to 46 from 49 in August in the National Association of Home Builders/Wells Fargo Housing Market Index. A number below 50 is considered negative.

The drop in confidence underscores how the combination of elevated interest rates, building-material supply chain disruptions, and high home prices have taken a toll on affordability and have rapidly cooled what was once a runaway housing market.

“Builder sentiment has declined every month in 2022," NAHB Chief Economist Robert Dietz said in a statement."And the housing recession shows no signs of abating as builders continue to grapple with elevated construction costs and an aggressive monetary policy from the Federal Reserve that helped pushed mortgage rates above 6% last week, the highest level since 2008.”

Mortgage rates have been on the rise since the beginning of the year as the Federal Reserve affirms its commitment to tame inflation. In August inflation remained high, so the Fed is expected to raise its benchmark rate this week.

The average rate on the 30-year fixed mortgage hit 6.02% last week, up from 5.89% a week earlier and more than doubled from what it was a year ago, mortgage finance giant Freddie Mac reported. The monthly payment of a median-priced home is at least 66% higher from last year, according to Realtor.com.

“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households,” said NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga.

All three components of the sentiment index declined. Current sales conditions dropped 3 points to 54, and sales expectations for the next six months dipped one point to 46, while buyer traffic declined 1 point to 31, according to the index findings.

Regionally, the three-month moving average of the index in the Northeast fell 5 points to 51 and also dropped 5 points to 44 in the Midwest. In the South, the index slipped 7 points to 56, while in the West, sentiment declined 10 points to 41.

“In short, the housing market is in a deep recession, which is already hammering homebuilders and will soon depress housing-related retail sales. But housing and related activity accounts for less than 10% of GDP, so - like manufacturing - the sector can roll over without necessarily triggering a recession in the whole economy,” Ian Shepherdson, Chief Economist at Pantheon Macroeconomics wrote following the report.

“The longer and deeper the housing recession becomes, though, the greater the pressure it will exert on the Fed to dial back the pace of tightening,” he added.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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