Homebuilders starting to feel higher mortgage rates

The once-giddy mood among homebuilders, a side effect of the COVID-era housing boom, is ebbing in as mortgage rates surge.

Driving the news: The National Association of Home Builders' measure of confidence among builders of single-family homes fell for the fifth-straight month, near a two-year low.

• Separate gauges measuring sales expectations over the next six months and traffic of potential buyers also fell sharply.

Why it matters: The drop reflects how the Fed's push to lift rates is quickly changing the economic terrain for companies and consumers alike.

• Mortgage rates — heavily influenced by expectations for what the Fed will do with interest rates — have soared to more than 5.25%, from roughly 3%, for a 30-year fixed-rate loan.
• The rise — along with a roughly 20% rise in home prices over the last year — has drastically reduced affordability.

What they're saying: "The surge in rates is clearly choking off the flow of would-be new buyers," wrote Ian Shepherdson, chief economist at Pantheon Economics.

The bottom line: The Fed is trying to slow the breakneck pace of rising house prices, and homebuilders are clearly getting a bit jittery about a potential slowdown — but their mood, at least by recent standards, remains quite elevated.