The US housing market has plunged into a full-blown recession as tightened economic policy and surging expenses weigh on home builders.

Builder confidence has plummeted for eight consecutive months, marking its worst stretch since the housing market imploded in 2007 in the midst of the Great Recession, according to data released Monday.

The National Association of Home Builders/Wells Fargo Housing Market Index fell 6 points to 49 in August, falling below its “break even” point of 50 for the first time since May 2020.

“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” said NAHB chief economist Robert Dietz.

Demand within the once-booming housing market has slowed considerably in recent months as surging mortgage rates and steep purchase prices lock out many prospective home buyers.

Mortgage rates have spiked in response to the Federal Reserve’s move to raise interest rates to fight inflation. An average 30-year fixed mortgage rate has nearly doubled since January.

The affordability crisis has hampered the outlook for home builders that were already contending with abnormally higher expenses for construction materials and labor.

“Ongoing growth in construction costs and high mortgage rates continue to weaken market sentiment for single-family home builders,” said NAHB chairman Jerry Konter, a home builder and developer from Savannah, Ga.

The survey found that more consumers are “sitting on the sidelines” due to the steep cost of buying homes in what is a “troubling sign” for the market, Konter added. Buyer traffic in August hit its lowest point since April 2014, excluding the COVID-19 pandemic.

The NAHB’s latest findings also indicated that home prices are on the decline, with 19% of home builders that responded to the survey saying they’ve cut prices since July to encourage sales or protect against cancellations. Those listings had a median price reduction of 5% off their initial listing price.

Dietz acknowledged that conditions within the market could improve if inflation declines in the months ahead.