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Small Decline in Mortgage Rates Stokes Builder Confidence

The index, which is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years, rose four points to 72 in October, matching the level recorded in December of 1999.

The increase, said NAHB President Kent Conine, “clearly demonstrates how sensitive the housing market is to changes in interest rates.”

The index eroded some following the first week in September, when 30-year, fixed-rate mortgages averaged 6.44%, their most recent high, he said. But by the first week in October, “they had dropped back down to 5.77%, fueling a rebound in builder sentiment.”

The prognosis for single-family housing remains “very good,” said NAHB Chief Economist David Seiders, and an improving economy is expected to sustain “robust” levels of housing market activity even though mortgage interest rates will be “somewhat higher” than the record lows of earlier this year.

All three components of the index rose in October. Its gauge of current sales conditions rose six points to 79, the highest level since December of 1999; sales expectations for the next six months rose to 82, the highest since November of 1999; and the traffic of prospective buyers rose two points to 53.

Any number over 50 indicates that more builders view sales conditions as good than poor.

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