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U.S. homebuilders’ confidence in the housing market held steady this month, but many are worried that another fight over the federal budget could cause would-be buyers to put off home purchases.
The National Association of Home Builders/Wells Fargo builder sentiment index released today stayed at 54 this month. October’s reading was revised one point lower from its initial estimate.
Readings above 50 indicate more builders view sales conditions as good, rather than poor.
The index has stayed above 50 now for six straight months after being below that level since May 2006. It has held steady, even as mortgage rates have come off their record lows and home sales have slowed. Those readings suggest most builders are still optimistic that the housing recovery will endure.
But the trade association noted today that many consumers are holding off on buying a home because of concerns over another budget fight in Washington. Lawmakers reached a temporary agreement last month to reopen the government after a 16-day partial shutdown, but another potential shutdown looms.
“Policy and economic uncertainty is undermining consumer confidence,” said David Crowe, the NAHB’s chief economist.
Builder confidence took a hit in October because of the shutdown. Some buyers found it harder to close on their mortgages.
The budget impasse ended with only a temporary agreement to fund the government through Jan. 15. Lawmakers also agreed to allow the government to continue borrowing normally until Feb. 7.
Those deadlines coincide with the traditional start of the spring home-selling season, the traditional peak period for home sales.
The builders’ group did not flag higher mortgage rates as a concern this month. Rates rose sharply over the summer in anticipation of the Federal Reserve possibly reducing its bond purchases. Since then, sales of existing homes have slowed.
But mortgage rates began falling again in September after the Fed surprised markets by voting to keep buying $85-billion-a-month in bonds. Those purchases are intended to keep long-term interest rates low, which include mortgage rates.
The average rate on the 30-year fixed mortgage has ticked up the past two weeks, amid some signs of economic strength.
Mortgage buyer Freddie Mac said last week that the average on the 30-year loan increased to 4.35 percent from 4.16 percent the previous week. The average, however, is below the levels reached this summer and remains near historically low levels.
Builders’ confidence in the market for newly built homes has improved steadily since national measures of home sales and prices began to recover early last year.
In the latest survey, which included responses from 343 builders, a measure of current sales conditions was unchanged from October’s reading at 58. But builders’ outlook for single-family home sales over the next six months fell one point to 61, while a gauge of traffic by prospective buyers slipped one point to 43.
Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the homebuilders association.