U.S. Home Builder Confidence Rises in October

(Reuters) – U.S. home builder confidence rose in October for the second consecutive month, but volatile mortgage rates and low housing affordability continued to pose headwinds.

The NAHB/Wells Fargo Housing Market Index of builder confidence increased to 43 this month from 41 in September, as reported by the National Association of Home Builders on Thursday. A Reuters poll had previously indicated economists expected the outlook to rise to 42 this month.

The Federal Reserve had driven up interest rates between 2022 and 2023 to the 5.25%-5.50% range in an effort to combat high inflation, resulting in a slowdown in the housing market. However, mortgage rates had been falling ahead of a rate-cutting cycle, which commenced last month with a larger-than-usual half percentage point cut.

Investor expectations regarding the pace and extent of rate cuts by the U.S. central bank have since been tempered by stronger-than-anticipated readings on employment, consumer spending, and inflation, leading to a resurgence in mortgage rates.

Last week, the average 30-year fixed-rate mortgage jumped to 6.32%, marking the largest weekly increase since April, according to Freddie Mac data. The rate had declined to approximately 6% in late September from nearly 8% last October.

"We are forecasting uneven declines for mortgage interest rates in the coming quarters, which will improve housing demand but place stress on building lot supplies due to tight lending conditions for development and construction loans," NAHB Chief Economist Robert Dietz stated.

Data earlier this month indicated that U.S. construction spending unexpectedly declined in August, driven by a significant drop in expenditures on single-family housing projects.

Sales expectations for the next six months increased by four points to 57 in October compared to the previous month, according to the NAHB survey. The percentage of builders cutting prices remained unchanged at 32%, while the average price concession returned to its long-term trend of 6%, after dropping to 5% in September. Meanwhile, the gauge of prospective buyers rose by two points to 29.