Homebuilder Sentiment Slumps to One-Year Low as Mortgage Rates Surge

With summer drawing to a close, homebuilders are feeling discouraged as climbing mortgage rates are keeping buyers from making a move. Builder confidence in new-home sales dropped three points month over month, decreasing the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) to 32 on Wednesday. Any reading below 50 reflects the industry's pessimistic view of the market. This is the lowest HMI in a year. For context, builder sentiment has now remained below 40 for 17 consecutive months.NAHB Chairman Bill Owens attributes the end-of-summer downturn to a combination of factors, with high borrowing costs emerging as the main culprit sidelining potential buyers. Last week, Freddie Mac reported that the average rate on 30-year fixed home loans reached 6.76%, driven by oil shocks and inflation fears."Buyer traffic has weakened across much of the country, largely because of rising mortgage rates," says Owens. "Builders also continue to face higher material costs, rising gas and diesel prices and persistent labor shortages. In some markets, builders report that increased immigration enforcement is discouraging legal workers from reporting to job sites."NAHB Chief ...