U.S. homebuilders’ confidence eased this month after surging to the highest level in nearly a year in September.
Even so, builders remain optimistic overall about sales growth in months ahead, a reflection of how steady job gains are leading more Americans to buy newly built homes.
The National Association of Home Builders/Wells Fargo builder sentiment index released Tuesday fell two points this month to 63 following a reading of 65 in September.
Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has held above 60 the past two months after hovering at 58 earlier this year.
The pullback in the latest builder sentiment index is in line with what analysts polled by FactSet were expecting.
Builders’ view of current sales and a gauge of traffic by prospective buyers declined. Their outlook for sales over the next six months increased.
A strengthening job market and mortgage rates hovering near all-time lows have helped stoke demand for homeownership, pushing up sales of new and previously occupied homes. That, in turn, has been good news for homebuilders.
“The October reading represents a mild pullback from a jump in September, and indicates that the housing market continues to make slow and steady gains,” said Robert Dietz, the NAHB’s chief economist.
Despite declining in August, sales of new U.S. homes were running 20.1 percent higher through the first eight months of this year than in the same stretch of 2015.
All told, new home sales declined 7.6 percent in August to a seasonally adjusted annual rate of 609,000 units. That followed a surge in July that drove sales above a rate of 659,000 units, the fastest pace since October 2007. September new-home sales figures are due out next week.
The trend has helped maintain builders’ overall positive outlook and fueled a pickup in home construction for much of this year. Overall housing starts are up 6.1 percent through August from a year earlier, with construction of single-family houses leading the way.
More construction would help tackle a chronic shortage of available homes for sale, both in the new-home category and in existing homes. But homebuilders in many markets continue to face rising land and labor costs.
This month’s builder index was based on 299 respondents.
A measure of current sales conditions for single-family homes slipped two points to 69, while builders’ view of sales over the next six months increased one point to 72. A gauge of traffic by prospective buyers dipped one point to 46.
On a regional basis, the index found builder sentiment improved in the Northeast and Midwest, but declined in the South and West.
Though new homes represent only a fraction of the housing market, they have an outsized impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB data.