The hard data on the US housing market has been weakening for most of this year but the blowback for sentiment in the homebuilder industry has been mild – until now.

The Housing Market Index (HMI), a monthly benchmark of survey results, fell in the November update to the lowest reading in more than two years. “For the past several years, shortages of labor and lots along with rising regulatory costs have led to a slow recovery in single-family construction,” says Robert Dietz, chief economist at the National Association of Home Builders (NAHB), which publishes the data. “While home price growth accommodated increasing construction costs during this period, rising mortgage interest rates in recent months coupled with the cumulative run-up in pricing has caused housing demand to stall.”

HMI is still close to the post-recession peak reached last December, but it’s clear that sentiment, along with hard data from other corners of the housing market, has been trending down this year. As the chart below shows, housing starts and home sales have weakened in 2018 and the latest tumble in HMI suggests that the downshift will continue in the months ahead.

The weakness in this key slice of the US economy can’t be denied, but the warning signs have been bubbling for months. In July, for instance, I considered the possibility that the wobbly housing data would act as a brake on economic growth generally.

Fast forward four months and it’s becoming clear that the stellar 4.2% increase in second-quarter GDP will probably mark a growth peak for the foreseeable future, in part because of the headwinds from housing.

Today’s update on new residential housing construction is expected to post a moderate rebound in October activity, according to the consensus forecast via Econoday.com. But the trend for housing starts is expected to remain weak for the foreseeable future, based on a set of combination forecasts for the one-year trend. Today’s release is projected to reflect year-over-year growth slipping into modestly negative terrain after rising 3.7% in September.