High mortgage rates continue to dampen U.S. builder confidence

WASHINGTON, Oct. 17 (Xinhua) -- Stubbornly high mortgage rates that have remained above 7 percent for the past two months continue to take a heavy toll on builder confidence, as sentiment levels have dropped to the lowest point since January, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released Tuesday.

Builder confidence in the market for newly built single-family homes in October fell four points to 40 from a downwardly revised September reading, marking the third consecutive monthly drop in builder confidence. Any number below 50 indicates that more builders view conditions as poor than good.

"Builders have reported lower levels of buyer traffic, as some buyers, particularly younger ones, are priced out of the market because of higher interest rates," said NAHB Chairman Alicia Huey, a custom home builder and developer from Birmingham, Alabama.

"Higher rates are also increasing the cost and availability of builder development and construction loans, which harms supply and contributes to lower housing affordability," said Huey.

Since late September, mortgage rates are up nearly 40 basis points to 7.57 percent, holding at the highest level since 2000, according to Freddie Mac.

Interest rates have increased on the Federal Reserve's apparent higher-for-longer monetary policy stance, better than expected macro growth during the third quarter and longer-term concerns over government budget deficits.