By William Edwards and Jeff Kearns

Bloomberg News

Sentiment among U.S. homebuilders climbed to the highest in almost a year on stronger current sales momentum, adding to signs that lower mortgage rates are giving the industry a boost.

The National Association of Home Builders/Wells Fargo Housing Market Index increased to 68 in September from an upwardly revised 67 in August, according to a report Tuesday that exceeded estimates in a Bloomberg survey. The index component for present sales of single-family homes climbed to the best level since May 2018, offsetting a drop in the gauge of expected sales in the next six months. Buyer traffic was unchanged at the best level of this year.

Mortgage rates have declined to the lowest level in almost three years as the trade war and weaker global growth weigh on the outlook for the world’s largest economy. Borrowing costs eased after the Federal Reserve in July cut interest rates for the first time in a decade and policymakers are expected to make a second-straight reduction Wednesday.

Low interest rates and solid demand are underpinning builder sentiment despite supply-side challenges that reduce housing affordability, including a shortage of lots and labor, according to the builders association, a Washington-based trade group with more than 140,000 members.

“Solid household formations and attractive mortgage rates are contributing to a positive builder outlook,” Chief Economist Robert Dietz said in a statement.

“However, builders are expressing growing concerns regarding uncertainty stemming from the trade dispute with China.”

Sentiment in the Northeast matched the highest since 2005 while readings for the South and West both climbed to the best level in more than a year. The Midwest was unchanged at the highest in almost a year.

The manufacturing slowdown “is holding back home construction in some parts of the nation,” the association said, citing its Home Building Geography Index, a quarterly measure of building conditions that uses county-level data on construction permits.

Readings above 50 indicate that more builders view conditions as good than poor.

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