US homebuilder sentiment falls in August with rising mortgages

By Ovunc Kutlu

ISTANBUL (AA) - Homebuilder sentiment in the US plummeted in August due to rising mortgage rates, according to a report released Tuesday.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) fell six points to 50 from 56 in July.

The decline put an end to seven consecutive months of increases with rising mortgage rates nearing 7%, as "stubbornly high shelter inflation have further eroded housing affordability and put a damper on consumer demand," said the report.

While above 50 is considered positive for the housing sector, the index measures sentiment among homebuilders and is considered an important indicator for housing investment and consumer spending on appliances and furnishings, which affect the overall economy.

"Rising mortgage rates and high construction costs stemming from a dearth of construction workers, a lack of buildable lots and ongoing shortages of distribution transformers put a chill on builder sentiment in August," NAHB Chairman Alicia Huey said in a statement.

"But while this latest confidence reading is a reminder that housing affordability is an ongoing challenge, demand for new construction continues to be supported by a lack of resale inventory, as many home owners elect to stay put because they are locked in at a low mortgage rate," she added.

NAHB chief economist Robert Dietz said shelter inflation is up 7.7% from a year ago and accounted for 90% of the consumer price index reading of 3.2% in July.

"The best way to bring housing inflation down and ease the housing affordability crisis is to enact policies at all levels of government that will allow builders to construct more homes to address a nationwide shortfall of approximately 1.5 million housing units," he added.