Homebuilder sentiment in the single-family home market has fallen to half what it was just six months ago as mortgage rates climb, according to a new report.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which is designed to gauge market conditions, fell 8 points to 38 in October from the previous month.

That’s the lowest level since 2012, with the exception of a brief drop at the start of the coronavirus pandemic. A rating below 50 is considered negative.

Builders cite rapidly rising interest rates for the decline in confidence. The average rate on the 30-year fixed was 7.12% on Monday, according to Mortgage News Daily. That’s up from 3% at the start of this year.

“High mortgage rates … have significantly weakened demand, particularly for first-time and first-generation prospective home buyers,” said NAHB Chairman Jerry Konter, a homebuilder and developer from Savannah, Georgia. “This situation is unhealthy and unsustainable.”

Of the index’s three components, current sales conditions slid 9 points to 45, and sales expectations in the next six months dropped 11 points to 35. Buyer traffic fell 6 points to 25.

“This will be the first year since 2011 to see a decline for single-family starts,” said Robert Dietz, chief economist for the NAHB.

Given expectations that interest rates will continue to be elevated, Dietz said 2023 is forecast to see additional single-family building declines.

On a three-month moving average, the sentiment score in the Northeast fell 3 points to 48. In the Midwest it dropped 3 points to 41. In the South it fell 7 points to 49 and in the West declined 7 points to 34.