Optimism Among Homebuilders Falls to a Three-Year Low
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Optimism among American homebuilders fell in March to a three-year low in response to rising long-term mortgage rates and slowing demand.
The National Association of Home Builders/Wells Fargo’s index of builder confidence decreased to 55 from 56 in February, the Washington-based association said yesterday.
Higher mortgage rates and purchase prices are making homes less affordable, discouraging buyers during the spring season, when sales usually rise. Industry groups forecast sales will fall in 2006 after five straight record years, suggesting housing will contribute less to economic growth.
“Rising interest rates and high rates of home-price appreciation have raised the bar for homeownership to beyond what some families can reach,” said David Seiders, chief economist of the homebuilders’ group. The decline in confidence “provides the latest evidence of a predicted and orderly cooling process for the nation’s single-family new-home market.”
The median forecast in a Bloomberg News survey of economists called for the builder confidence gauge to decline to 56 from an originally reported 57 in February. Readings greater than 50 mean builders consider the outlook for sales to be positive.
A measure of expectations for future sales fell to 62 in March from 64 in February. The March reading is the lowest since November 2001, according to an economist with the National Association of Home Builders, Michael Carliner. The index of buyer traffic fell to a three-year low of 39 from 40, he said.
