Persistently high mortgage rates above 7 percent have eroded builder confidence, according to the National Association of Home Builders. The Wells Fargo Housing Market Index fell five points to 45, falling below the key break-even measure of 50 for the first time in five months.
This follows a six-point drop in August.
“The two-month decline in builder sentiment coincides with when mortgage rates jumped above 7 percent and significantly eroded buyer purchasing power,” said NAHB Chairman Alicia Huey. “And on the supply-side front, builders continue to grapple with shortages of construction workers, buildable lots and distribution transformers, which is further adding to housing affordability woes. Insurance cost and availability is also a growing concern for the housing sector.”
“High mortgage rates are clearly taking a toll on builder confidence and consumer demand, as a growing number of buyers are electing to defer a home purchase until long-term rates move lower,” said NAHB Chief Economist Robert Dietz. “Putting into place policies that will allow builders to increase the housing supply is the best remedy to ease the nation’s housing affordability crisis and curb shelter inflation. Shelter inflation posted a 7.3 percent year-over-year gain in August, compared to an overall 3.7 percent consumer inflation reading.”