Home builders say cancellations are increasing because of rising mortgage rates even as their confidence in the market rose slightly over the past month, according to a new survey.
The average 30-year fixed-rate mortgage surpassed 7%, the highest in seven months, Freddie Mac said on Thursday.
It edged up to 7.04% from 6.93% last week. A year ago, it averaged 6.6%.
Confidence in the market for newly built single-family homes rose a point in January but concerns lingered about how tariffs on building materials and a government deficit could affect inflation and mortgage rates, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
“NAHB is forecasting a slight gain for single-family housing starts in 2025, as the market faces offsetting upside and downside risks from an improving regulatory outlook and ongoing elevated interest rates,” said NAHB Chief Economist Robert Dietz.
“And while ongoing, but slower easing from the Federal Reserve should help financing for private builders currently squeezed out of some local markets, builders report cancellations are climbing as a direct result of mortgage rates rising back up near 7%,” he added.
NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan., said builders are facing “continued challenges” from the rising rates.
The survey also showed that 30% of builders cut home prices in January, with the average discount being 5%.
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