Rates Down, Houses Go Up

Lower mortgage interest rates helped boost home builders' confidence in the market for new single-family homes during August, according to a monthly canvass compiled by the National Association of Home Builders and Wells Fargo Bank.

The monthly Housing Market Index rose to a current level of 71, up four points from a revised July figure of 67. Builder confidence is now on par with its year-ago level.

“Long-term mortgage rates fell to 6.05 percent in July, from 6.29 percent the previous month, then continued to fall in the beginning of August,” said Bobby Rayburn, president of the National Association of Home Builders. “This undoubtedly helped push builder optimism to its highest level since October of 2003 as potential buyers who might have been sitting it out started diving back into the market when rates headed downward. With the ongoing favorable financing climate and solid house-price performance, we have good reason to expect continued strength in the housing market in the months ahead.”

All three components of the Housing Market Index climbed in August, with the biggest gain in the index gauging traffic of prospective buyers, which rose six points to its second-highest level ever, a reading of 57, three points shy of its historical high of 60 reached in May 1999. The index gauging sales expectations for the next six months rose four points to a level of 78.

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