Amid Lower Interest Rates, Builder Confidence Edges Higher

Builder confidence in the market for newly built single-family homes rose one point to 66 in August, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index.

The HMI index gauging current sales conditions increased by two points to 73 and the component measuring traffic of prospective buyers rose by two points to 50. The measure charting sales expectations in the next six months fell by one point to 70.

Regionally, the South increased by one point to 69; the West rose by one point to 73 and the Midwest inched up a single point to 57. The Northeast fell by three points to 57.

“Even as builders report a firm demand for single-family homes, they continue to struggle with rising construction costs stemming from excessive regulations, a chronic shortage of workers and a lack of buildable lots,” said NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Conn.

“While 30-year mortgage rates have dropped from 4.1 percent down to 3.6 percent during the past four months, we have not seen an equivalent higher pace of building activity because the rate declines occurred due to economic uncertainty stemming largely from growing trade concerns,” said NAHB Chief Economist Robert Dietz. “Although affordability headwinds remain a challenge, demand is good and growing at lower price points and for smaller homes.”

Earlier this week, the Mortgage Bankers Association’s Builder Applications Survey data for July show mortgage applications for new home purchases increased by 11 percent from June and by 31.2 percent from a year ago.

By product type, conventional loans composed 69.1 percent of loan applications, FHA loans composed 18.1 percent, RHS/USDA loans composed 1.0 percent and VA loans composed 11.7 percent. The average loan size of new homes decreased from $329,593 in June to $325,457 in July.

MBA estimated new single-family home sales were at a seasonally adjusted annual rate of 754,000 units in July, based on data from the BAS, an increase of 16.7 percent from the June pace of 646,000 units. On an unadjusted basis, MBA estimated 63,000 new home sales in July, an increase of 8.6 percent from 58,000 new home sales in June.