Orders for new U.S. homes slowed in the second quarter, suggesting for some that rising interest rates have sapped the rate of building, the Wall Street Journal reported.
Indicative of the slowdown, according to several analysts, was a 12 percent increase in new home orders from D.R. Horton, the country’s largest builder by closings. The builder was expected to show a gain of 30 percent or more.
Many of the company’s customers are first-time buyers who were spooked by climbing interest rates, according to analysts cited by the Journal. The rate for a 30-year fixed-rate mortgage rose to 4.31 percent this week from 3.59 percent two months ago, according to Freddie Mac.
“I think most people are worried about whether there’s another shoe to fall on the demand side from this rate hike,” Stephen East, a St. Louis-based analyst who follows home-builder stocks for ISI Group, told the Journal. “I think July and August will be a bit weaker than the normal seasonal slowing. But if rates stay at this level, then I think the consumer will have adjusted … and get back out into the market a bit better.”
Despite the overall slowdown, new-home sales appeared robust in June, increasing by 8.3 percent to a seasonally-adjusted rate of 497,000 — the highest level since May 2008 and 38.1 percent higher than the same month a year prior. [WSJ] — Julie Strickland