KB Home CEO says confidence matters more than mortgage rates, and confidence just took a hit

By Diana Olick | CNBC

Mortgage rates have been falling sharply over the last three months, which should be a major positive for the housing market, but so far reaction has been muted in both home sales and new home construction.

The CEO of a major U.S. homebuilder says it’s all about confidence.

“I’ve always maintained over the years that consumer confidence means more than rates to the home buying decision,” said Jeff Mezger, CEO of Los Angeles, CA-based KB Home. “We’ve had some great years where interest rates were 8, 9,10%—because people find a way when they feel confident about the future.”

But consumer confidence fell sharply in August, according to a just-released report from the University of Michigan. The report said consumers felt they needed to be cautious about spending in anticipation of a potential recession. That bled into housing.

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