Homebuilders haven't felt this bad about the market since 2012

Homebuilder confidence slumped to the lowest level since 2012 as builders contend with rising mortgage rates, high materials costs, and a challenging labor market.

Confidence in the market for new single-family homes fell three points to 29 in October, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index reading. The last time the reading was this low, the housing market was slowly working its way back from the depths of the financial crisis.

Mortgage rates above 7% , high gas prices , and elevated inflation have all sapped buyer interest in new construction homes. In response, 43% of builders cut prices in October, the highest share so far this decade. And 65% are using sales incentives, such as mortgage rate buydowns, to attract buyers.

Making matters worse, the cost of construction loans, diesel, and construction materials are all on the rise. Immigration enforcement is also weighing on builders' ability to find and keep workers.

Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages, and home insurance.