NAHB: Home builder confidence measure declines slightly in September

Higher interest rates on home mortgages likely caused builder confidence in the market for new single-family homes to dip slightly in September after an exceptionally optimistic reading in the previous month, according to the National Association of Home Builders' Housing Market Index, which was released Sept. 6.

Despite a three-point decline in the overall index, which brought it to 68 from last month's 71 reading, builder expectations for the next six months held firm at 78.

"Builders had one of the hottest summers ever this year in terms of housing demand, largely because of the incredibly favorable interest rates just before mid-year," said NAHB President Kent Conine, in an NAHB news release. "Following the move up in rates in early September, it was to be expected we'd adjust our expectations accordingly. Even so, there is a strong current of optimism throughout our industry that today's very healthy activity is sustainable through at least the end of this year."

NAHB Chief Economist David Seiders noted that the accelerating economy is another factor for continued optimism among home builders. Even with the somewhat higher interest rate structure, Seiders said, the improving economy should spur home sales.

The Housing Market Index is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years. Home builders are asked to rate current sales of single-family homes and sales expectations for the next six months as "good," "fair" or "poor." They are also asked to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores for responses to each component are used to calculate a seasonally adjusted index, where any number over 50 indicates that more builders view sales conditions as good than poor.

Although the Housing Market Index slipped three points to 68 in September, this is still the second-highest reading since February 2000, when the index was at 69. As for its components, the index gauging current sales conditions fell four points to 73 in its latest reading.

Meanwhile, the index gauging sales expectations for the next six months was unchanged at 78. Prior to August, the expectations component had not reached as high as that since December 1999. The index gauging traffic of prospective buyers fell five points to 50.