U.S. housing starts slid about 3% in October from the month prior, mostly due to all that horrible hurricane activity in the Southeast. Permits for new housing construction were down nearly 8% year over year, according to data from the Census Bureau. On the glass half full side of things though, homebuilders are apparently feeling a bit more, well, glass half full-ish. Yesterday, the National Association of Homebuilders reported its third straight month of improvement in its homebuilder confidence index.

But there’s still a lot of uncertainty in the new home market, both for builders and buyers.

In Portland, Oregon, the Federal Reserve’s recent rate cuts have helped homebuilder Justin Wood. The construction loans he takes out from banks to build townhomes and cottages are cheaper.

“We are directly tied to the Fed’s funds rate, so when they come down three quarters of a point, we come down three quarters of a point,” he said. “You know it’s the difference of a few thousands of dollars of interest over the course of a year.”

The problem for Wood — and the entire homebuilding industry — is that the mortgage market is tied to interest rates on longer-term government debt.

And as those rates have gone up the past two months, he’s had to keep spending thousands of dollars offering interest rate buydowns and other incentives for new home buyers.

“A lot of us were really hoping for that light of the end of the tunnel for starting to see rates come down for mortgages, and if anything they’ve gone the opposite direction,” Wood said.

Economist Rob Dietz at the National Association of Homebuilders said the industry broadly expects mortgage rates to settle down in 2025, and for the pace of new construction to pick up.

Ironically though, that means demand for some key housing materials is rising right now.

“Just a few months ago, the typical price of lumber was around $380, $390 per 1,000 board feet. Right now it’s up to $440. So that’s a notable uptick,” he said.

Construction worker wages have also gone up this year.

Dan Dunmoyer at the California Building Industry Association said he’s concerned about how the new administration’s immigration policies may push labor costs even higher.

“People saying, ‘Well, I have my green card. I’m able to be here. I just don’t want to deal with the hassle. Maybe part of my family doesn’t have it, so I’m just going to go back to where I come from,'” Dunmoyer said.

About one in every four construction workers in the U.S. is an immigrant.