(Bloomberg) — US homebuilders grew less upbeat this month about sales prospects as surging mortgage rates risk spooking buyers.
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A gauge of the outlook for home purchases over the next six months dropped 6 points to 60, the first decline since June, according to data from National Association of Home Builders and Wells Fargo.
Despite the decrease, the group’s index of overall builder sentiment rose 1 point in January to a nine-month high of 47 on more optimism about current sales and prospective buyer traffic. Prospects for a favorable regulatory environment under the incoming Trump administration also boosted builder sentiment.
The mixed signals illustrate an uneasy period for builders. The industry has been able to lure buyers with generous sales incentives, including mortgage rate buydowns, in which builders make up-front payments on behalf of customers to lower interest costs.
However, those rates surpassed 7% last week for the first time since June, based on Mortgage Bankers Association data, complicating the outlook for the industry ahead of the critical spring-buying season.
“While ongoing, but slower easing from the Federal Reserve should help financing for private builders currently squeezed out of some local markets, builders report cancellations are climbing as a direct result of mortgage rates rising back up near 7%,” NAHB Chief Economist Robert Dietz said in a statement.
The group’s measure of present sales rose to 51, the highest since May, while a gauge of traffic from prospective buyers rose to a nine-month high of 33.
Aside from the surging mortgage rates, residential land is rising in price, and many private builders are seeing high financing costs for their projects, NAHB Chairman Carl Harris, a custom homebuilder from Wichita, Kansas, said in the release. However, the industry is hopeful that policies from President-elect Donald Trump will stoke the economy and cut the regulatory burden.
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