NEW YORK (Reuters) - U.S. homebuilder confidence neared an eight-year high in August as limited supply of new and existing homes and strong buyer demand outweighed higher mortgage rates, data from the National Association of Home Builders on Thursday showed.
The NAHB/Wells Fargo Housing Market index rose to 59 this month, its fourth consecutive monthly gain and best showing since November 2005. July’s reading, initially reported at 57, was revised to 56.
Analysts polled by Reuters had expected the index to sag to 56 in August. Readings above 50 mean more builders view market conditions as favorable than poor.
“Builders are seeing more motivated buyers walk through their doors than they have in quite some time,” NAHB Chairman Rick Judson said in a statement. “What’s more, firming home prices and thinning inventories of homes for sale are contributing to an increased sense of urgency among those who are in the market.”
The survey’s index on homebuilders’ view on current sales conditions rose to 62 from a revised 59, the industry group said.
Mortgage rates, however, have risen sharply over the last few months, with 30-year fixed rates hovering around 4.6 percent, about a full percentage point above where they stood at the start of the year.
The rise was spurred mostly by speculation that the Federal Reserve would begin winding down its monthly bond-purchasing program later this year and likely end it in mid-2014. Those purchases have helped keep long-term Treasury yields and average mortgages rates low.
NAHB Chief Economist David Crowe warned that these “ongoing headwinds of tighter credit” could slow momentum, as could a low supply of finished lots and construction labor.
The gauge of expectations for single-family home sales for the next six months edged up 1 basis point to 68 after having climbed 15 basis points between May and July. The component on prospective buyer traffic held steady at 45.
The government will release its July report on housing starts on Friday. Economists forecast home construction likely grew at an annualized pace of 900,000 units last month, faster than June’s 836,000 unit rate.
Editing by Chizu Nomiyama