Homebuilder optimism hits 32-month low December fall linked to rising mortgage rates By Bloomberg News | December 20, 2005
WASHINGTON -- Optimism among US homebuilders unexpectedly fell in December, dropping to a 32-month low, as executives braced for a slowdown in the housing market after a five-year boom.
The National Association of Home Builders/Wells Fargo's index of builder confidence slid to 57, the lowest since April 2003, from a revised 61 in November, the Washington-based association said yesterday. The median forecast in a Bloomberg News survey of 15 economists was for an increase to 61 from an originally reported 60 for November.
Rising mortgage rates have priced some buyers out of the market in recent months and made speculative purchases less attractive for investors. Companies including Toll Brothers Inc., the largest US builder of luxury homes, are cutting sales forecasts, suggesting housing will make a smaller contribution to economic growth.
''The housing market appears to be coming off the recent record pace of home sales," David Seiders, the homebuilder group's chief economist, said in a statement. ''Our surveys indicate that three out of every four builders are experiencing some buyer resistance to current home prices, and many are offering certain concessions to buyers in order to help maintain sales volume."
Forecasts in the Bloomberg News survey ranged from 58 to 64. Readings greater than 50 mean builders consider the outlook for sales to be positive.
The gauge of buyer traffic fell to a 33-month-low of 39 this month from 46 in November. The current sales measure dropped to a 31-month-low of 63 from 67. Expectations for the next six months held steady at 65.
Confidence declined in all four regions, with the biggest drop occurring in the West, which slid to 74 from 81. Confidence in the Midwest fell to 33 from 37, in the Northeast to 59 from 61, and in the South to 66 from 68.
Toll Brothers on Dec. 8 said earnings in 2006 may increase at the slowest pace in four years after fiscal fourth-quarter profit gained 72 percent on demand from affluent buyers.
''We're seeing a moderation" in demand, chief financial officer Joel Rassman said.
The National Association of Home Builders forecasts declines next year of 6.5 percent for new home sales and 5.8 percent for housing starts.
Mortgage rates are rising as the Federal Reserve raises borrowing costs to control inflation. The 30-year fixed mortgage rate has increased to 6.30 percent from 5.77 percent this year.
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