November 11, 2020 4:29 pm

Builder Confidence Up Even as Mortgage Application Volume Struggles

Housing continues to be the bright spot in the economy, even as it appears to have somewhat slowed down. Reports continue to show that housing is moving forward despite any obstacles being thrown in the path. Builder confidence for new constructed single family homes is up even as mortgage application volume continues to struggle.

According to the National Association of Home Builders/Wells Fargo Housing Market Index, builder confidence reached the highest point in almost eight years. The index increased 3 points in August to 59 and was the fourth straight month of gains. Builder confidence represents the expectations for new home sales over the next six months. Any number that is above 50 is an indication that more builders consider the conditions as good. “Builders are seeing more motivated buyers walk through their doors than they have in quite some time,” said NAHB Chairman Rick Judson. “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 Census Bureau and Department of Housing and Urban Development reported on July 24th that sales of new single family homes for the month of June were at a seasonally adjusted annual rate of 497,000. This amount was 8.3% higher than the May rate which was revised to 459,000. It was also 38.1% above the number reached in June 2012.

While builder confidence is positive, mortgage application volume continues to struggle after the recent rise in mortgage rates. While rates have not risen dramatically, it is still having an impact on the amount of consumers looking to finance. For the week ending August 9th, mortgage applications fell 4.7% on a seasonally adjusted basis from the week earlier, according to the Mortgage Bankers Association’s Mortgage Composite Index. The Purchase Index decreased 5% on a seasonally adjusted basis from the prior week. However, purchase applications are up 4% higher than at the same time last year. The most recent report for the week ending August 16th shows that application volume dropped 4%, however, the Purchase Index increased 1% on a seasonally adjusted basis, which was 5% higher than a year ago.

While mortgage rates may be having an impact on the overall volume of applications, especially on refinances, the sudden increase in interest rates has led many consumers to make a move to purchase before borrowing rates go up significantly. For builders, this has been a positive turn of events since the inventory for existing homes has been consistently down, thus making newly built homes desirable.

Rosemary Rugnetta has been writing since 2010 for, a company that matches consumers with banks and lenders offering low mortgage rates. Previous to her writing career, Rosemary spent 13 years working hands-on in the mortgage industry as a mortgage loan analyst, certified mortgage underwriter, loan processor and property manager.

  • Strong builder confidence is usually a good sign for the economy. It is also good to know that builders are seeing more motivated buyers.