Builders Price Increases Slow as Interest Rates Rise

U.S. home builders slowed down price increases in August as higher interest rates led to a 4 percent drop in builder sales, a survey of 273 builders found.

The survey conducted by John Burns Real Estate Consulting, a firm based in Irvine, Calif., found home builder sales fell 4 percent from July to August, a month in which sales typically rise 2 percent, The Wall Street Journal reported Wednesday.

In the August survey, 47 percent of home builders indicated they were raising prices, down from 64 percent in July.

The August survey found 48 percent of home builders indicated they had kept prices unchanged in the month, while 5 percent indicated they had lowered prices – the largest percentage in that category since March 2012, the Journal said.

Interest rates are up nearly a percentage point since May, reaching 4.57 percent in August, and price hikes have affected the volume of business, analysts say.

“The fact that we saw a 4 percent decline [in sales] does suggest there is more to it than just normal seasonality,” said Jody Kahn, a senior vice president at the consulting firm.

“The price increases are crazy,” Keller Williams Realty real-estate agent Jody Kahn said.

“I’ve seen some builders that have raised their prices $100,000 over a three-month period. That has a big impact on people buying new construction,” Kahn said.

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