Builder Confidence Ends Growth Streak in October

The National Association of Home Builders' (NAHB) index of builder sentiment fell in October, ending a four-month streak of gains that resulted in a nine-year peak.

The group's Housing Market Index, a measure of homebuilder confidence in the market for newly built, single-family homes, lost five points in this month’s reading, bringing it to 54. An index value above 50 indicates market perceptions are more positive than negative.

"We are seeing a return to the mid-50s index level trend established earlier in the summer, which is in line with the gradual pace of the housing recovery," said NAHB Chairman Kevin Kelly.

All three index components lost ground in October, led by six-point declines in both the gauge of current single-family sales (to 57) and the gauge of traffic from prospective buyers (to 41). The index measuring sales expectations in the next six months slipped three points, meanwhile, falling to 64.

Despite the all-around decline, NAHB's chief economist, David Crowe, remains optimistic.

"While there was a dip this month, builders are still positive about the housing market," Crowe said. "[H]istorically low mortgage interest rates, steady job gains, and significant pent up demand all point to continued growth of the housing market."

Month-to-month, confidence declined in all four census regions, led by an eight-point drop in the Midwest to a reading of 53. The Northeast saw the smallest decline—two points to a reading of 40—while the South and Midwest posted moderate decreases.

Looking at the three-month moving average, each region's index was little changed. Both the Northeast and Midwest remained flat in October at 41 and 59, respectively, while the West lost a single point to settle to 57. Meanwhile, the South reported the only increase, a two-point gain to 58.