Home builder confidence fell for the eighth straight month in August, as financial advisors say market conditions have forced many of their clients to the sidelines.

Advisors described a market of extremes, with some clients stubbornly refusing to reduce prices on their home, and other clients who have given up on trying to sell or buy at all.

“The market is a little weird right now and it’s just not checked into reality,” said Jay Zigmont, founder of Childfree Wealth in Water Valley, Miss.

The National Association of Home Builders/Wells Fargo Housing Market Index fell six points in August to 49, marking the first time since May 2020 that the index fell below the key break-even measure of 50, the trade group reported on Monday. The index , which is based on a monthly survey of home builders and measures the pulse of the single-family housing market, stood at 75 a year ago and was at 83 in January.

Builder confidence fell in all regions, led by the West, which declined 11 points to 51. The Northeast dropped nine points to 56, the South dropped seven points to 63, and the Midwest dropped three points to 49.

“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” NAHB Chief Economist Robert Dietz said in a statement. He added that the volume of single-family starts will post its first decrease since 2011, but there is room for optimism that the demand-side of the market in the coming months will stabilized “as signs grow that the rate of inflation is near peaking.”

Financial advisors said the declining housing market have forced clients to pause plans to buy or sell their home.

“The recent hike in interest rates and the talk of a housing recession has, without a doubt, lessened our clients’ desires to buy or build a new home,” said Bryce Koch of Hiley Hunt Wealth Management in Omaha, Neb. He added that some of his homeowner clients have decided to stay put and invest in their home to make it more enjoyable. “This allows our clients to maintain their very affordable mortgage payment, with a rate of 3% or even lower, but still add something new to their house that they may have been longing for."

Mortgage rates, which had begun to decline in 2019, hit new lows in 2020 and 2021 in response to the Covid crisis. By December 2021, the monthly average rate for a 30-year-fixed-rate mortgage was 2.68%, according to Freddie Mac. The rates continued in the 2% to 3% range throughout 2021. But in January, rates edged upward to 3.45%. The average rate reached 5.41% in July, according to Freddie Mac.

David Born of Private Financial Management LLC in the San Francisco Bay Area said higher housing costs not only have forced buyers on the sidelines, but have also affected sellers, “who just have not accepted the reality of what’s happening in the market,” he said. “Sellers want the price that they could get in January and the buyers just can’t afford it."

Born said he has encountered potential sellers who took their homes off the market because they did not get the listed price. One homeowner, he said, listed a home for $2.5 million, but it went unsold. The seller, he said, took the home off the market after a while and relisted it at $2.9 million “hoping to play on people’s psychology,” Born said. The home still has not sold, he said.

Many people are waiting the market out, but some people can't afford to do that, such as people who are retiring or who have changed jobs, advisors said.

Andrew Mastro, president and founder of Wrought Advisors in Haddon Township, N.J., spoke of a couple looking to move because of a job change that bought an old home two years ago and spent a lot of money to modernize it. That increased the value of the house. They were looking to buy something that was comparable in price, but they were unable to find a home and ended up renting a new home. Their former home is up for sale, he said. But even if the couple had found a similarly priced home, they would have paid a much higher mortgage at a 5% rate, instead of the 3% that they had. “For this couple, it was one of those decisions that’s worth it to them, even though it’s going to hurt them financially,” Mastro said.

For some clients, renting has become an option, said Zigmont of Childfree Wealth. He has clients who are childless and are a bit more mobile, he said. “We have a lot of discussions about why [they would] want to buy a house because we have people that could live anywhere and work anywhere,” he said. “I think we just have this assumption that the way to wealth is to own a house. ... That is one way to get wealth. but that does not necessarily fit everyone,”

Zigmont, whose clients range in age from 35 to 55, said renting has becone an option for clients who want to maintain homes on the East and West coasts. Others, he said, would like to live a “kind of a nomadic life.” Some of his retirees and pre-retirees have said they would be OK with living Airbnb to Airbnb, he said. “It’s just a different way of life.”

As for his clients who own a home, Zigmont said the debate they are having is trying to figure out the right time to sell. “Your crystal ball is as good as mine on that one,” he said.