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Builder confidence remains positive, but rates may impact future sentiment

Posted on Tuesday, September 17, 2013 at 11:22:16 AM

Affordable residential financing affects home builders as much as it does buyers. Higher rates might put a damper on activity, although most builders have remained confident in the housing market.

Home builder confidence was positive for September, staying level from the previous month, according to the Housing Market Index released by the National Association of Home Builders. This month comes after four consecutive periods of improvement, and the reading was at 58. Anything above 50 is considered a plus. On a regional level, the Midwest increased the most, with an HMI now at 64. 

"While builder confidence is holding at the highest level in nearly eight years, many are reporting some hesitancy on the part of buyers due to the sharp increase in interest rates," said NAHB chairman Rick Judson. "Home buyers are adjusting to the fact that, while mortgage rates are still quite favorable on a historic basis, the record lows are probably a thing of the past."

Traditionally, home builders depend greatly on buyers with residential financing, according to The Wall Street Journal. In addition, given the rising rates many people are closing now, which means more buyers have turned to existing-homes, not the new property market - possibly contributing to the current reading from the NAHB.