“Mortgage rates have increased more than 100 basis points since early May, and we anticipate that trend to continue, albeit gradually, during the next year,” Doug Duncan, Fannie Mae’s chief economist, said in a report Tuesday. He also expects economic growth to slow from the, “surprising” pace seen last quarter.

Regionally, home builder confidence increased the most in the Midwest and West and more moderately in the Northeast and South. Housing starts and building permit numbers for August will be released by the Commerce Department on Wednesday.

(Read more: Map: Tracking the recovery)

—By CNBC’s Diana Olick. Follow her on Twitter @Diana_Olick.

Questions?Comments? facebook.com/DianaOlickCNBC.

Article source: http://www.cnbc.com/id/101040159