Homebuilder Confidence Dips on Shutdown, Mortgage Rates

Homebuilder confidence is down, according to October's National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index report released today. The report's authors said a rise in mortgage rates, "paralysis" in Washington, and uncertainty about the debt limit took a toll.

After clocking in at a revised 57 points for September, October eased down 2 points to a reading of 55. Although analysts had expected another record-breaking month at 58, this latest report is still one of the highest readings in almost 10 years.

Any number over 50 indicates that more builders view sales conditions as good than poor, a point reached, in June, for the first time since April 2006. The survey looks at builder confidence in newly built single-family homes. 

"[W]e are still seeing signs of pent-up demand in many markets across the country," said NAHB Chairman Rick Judson in a statement today. "This slight dip in builder sentiment is the result of continuing challenges in the marketplace with regard to the cost and availability of labor and lots and uncertainty in Washington."

Digging deeper, all three of the index's components fell two points. Current sales conditions clocked in at 58, prospective buyer traffic remained in the red at 44, and future sales expectations for the next six months kept its lead at 62 points. The survey was conducted from Oct. 1 through Oct. 11.

NAHB Chief Economist David Crowe see this month's slump as temporary:

A spike in mortgage interest rates along with the paralysis in Washington that led to the government shutdown and uncertainty regarding the nation's debt limit have caused builders and consumers to take pause. However, interest rates remain near historic lows and we don't expect the level of rates to have a major impact on sales and starts going forward. Once this government impasse is resolved, we expect builder and consumer optimism will bounce back.

The association estimates that builders broke ground on single-family homes in September at a seasonally adjusted annual rate between 620,000 and 630,000 homes, in line with the August pace of 628,000.

-- Material from The Associated Press was used in this report.

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