1 of 2 | Confidence among home builders ended a seventh-month streak of optimism in August, with higher lending rates and a lack of construction workers contributing to the decline. File Photo by Roger L. Wollenberg/UPI |
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Aug. 15 (UPI) -- Inflationary pressures and increased lending rates are combining to put a dent in builder confidence, the National Association of Home Builder said Tuesday.
Market confidence for the construction of a new single-family home contracted in August, after having risen for seven consecutive months. The NAHB blamed the decline on mortgage rates that are approaching 7% for a fixed-term, 30-year loan to "stubbornly" high levels for the shelter component of consumer inflation.
NAHB Chairman Alicia Huey added the higher construction costs, which come as a result of a lack of construction workers, and the lack of available lots were compounding the issue.
"But while this latest confidence reading is a reminder that housing affordability is an ongoing challenge, demand for new construction continues to be supported by a lack of resale inventory, as many homeowners elect to stay put because they are locked in at a low mortgage rate," she said.
Lending as reported by the Mortgage Bankers Association is also on the decline, which deputy chief economist Joel Kan attributed to the spike to 6.94% for a 30-year mortgage.
Lending rates have increased in line with policies at the Federal Reserve meant to make borrowing prohibitive enough to curb demand and support a contraction in inflation. The shelter component of the Consumer Price Index, meanwhile, showed a 7.7% increase year-on-year to July, the second-largest increase after transportation services.
While this marks the first downturn in builder confidence in seven months, pressures have been building already. The number of respondents to a July survey from the Federal Reserve Bank of New York who said they expected to see the average price of a home increase jumped to its highest reading since July 2022.
