Workers install windows during construction of an apartment complex in Tempe, Ariz. The National Association of Home Builders said Tuesday its index of confidence among members is the highest in nearly eight years. ROSS D. FRANKLIN / Associated Press
U.S. homebuilders' confidence in the housing market held this month at its highest level in nearly eight years. But builders are starting to worry that sales may slow if mortgage rates continue to rise.
The National Association of Home Builders/Wells Fargo builder sentiment index released Tuesday registered at 58 this month. That's unchanged from August, which was revised down from an initial reading of 59.
Readings above 50 indicate more builders view sales conditions as good, rather than poor.
In the latest survey, which included 264 respondents, a measure of current sales conditions was unchanged, while a gauge of traffic by prospective buyers rose one point. But builders' outlook for single-family home sales over the next six months fell three points.
"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 Rick Judson, the NAHB's chairman.
Mortgage rates have risen more than a full percentage point since May, when Federal Reserve Chairman Ben Bernanke indicated the Fed could slow its $85 billion a month in bond buying this year.
The Fed is meeting this week, and many economists expect it will begin to reduce its bond-buying by about $10 billion, according to a survey by The Associated Press.
Builder confidence has been climbing steadily since the fall of 2011, gaining momentum in concert with the housing recovery. A year ago, the index was at 40. The last time the reading was above 58 was in November 2005, when it was 61.
Despite the rise in mortgage rates, financing a home remains low by historical standards. The average rate on the 30-year fixed mortgage was 4.57 percent last week, according to Freddie Mac.
Sales of newly built homes fell 13.4 percent to a seasonally adjusted annual rate of 394,000 in July, the lowest level in nine months. Sales are still up 7 percent in the 12 months ending in July. Yet the annual pace remains well below the 700,000 that is consistent with a healthy market.
That's stoked concerns that the market's momentum could slow as interest rates rise further.
Although new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the homebuilders association.
Original Print Headline: Homebuilder outlook steady amid rate fears
Real Estate
New home construction in the Tulsa region from January to August is outpacing last year's numbers, a continuation of the upward tick that started in 2012 following a six-year slide.
Average U.S. rates on fixed mortgages held steady this week, hovering near two-year highs. But rates could change quickly next week when the Federal Reserve addresses its bond purchase program.
