Homebuilder sentiment plummets as mortgage rates surge again

foxbusiness.com:

National Association of Home Builders CEO Jim Tobin explains how local governments have tied up housing construction projects.

Confidence among builders in the U.S. housing market unexpectedly plunged in August for the first time this year as a spike in mortgage rates dampened consumer demand for new homes.

The National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the single-family housing market, fell six points to 50, a three-month low. 

Any reading above 50 is positive. 

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Homes under construction in Sacramento, California, on Monday, July 3, 2023. (David Paul Morris/Bloomberg via Getty Images / Getty Images)

Prior to this month, sentiment among builders had been steadily rising as limited resale inventory pushed would-be buyers to seek out new construction instead. 

The shortage of available homes began because sellers who locked in a low mortgage rate before the pandemic began have been reluctant to sell with rates continuing to hover near a two-decade-high, leaving few options for buyers.

A recent report from Realtor.com showed that the number of available homes on the market in June was down more than 47% from the typical amount before the COVID-19 pandemic began in early 2020.

A house is for sale in Arlington, Virginia, July 13, 2023. (Photo by SAUL LOEB/AFP via Getty Images / Getty Images)

However, the latest data suggests a recent spike in mortgage rates is weighing on that demand.

«Rising mortgage rates and high construction costs stemming from a dearth of construction workers, a lack of buildable lots and ongoing shortages of distribution transformers put a chill on builder sentiment in August,» said