Builder Confidence Suffers Another Setback

Builder confidence fell again in October but remained north of neutral, the ""National Association of Home Builders"":http://www.nahb.org/default.aspx (NAHB) reported Wednesday in its Housing Market Index (HMI) report.

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The index, compiled each month through a survey in partnership with ""Wells Fargo"":https://www.wellsfargo.com/, gauges builder perceptions of current single-family home sales and sales expectations as ""good,"" ""fair,"" or ""poor. The survey also asks builders to rate traffic of prospective homebuyers as ""high to very high,"" ""average,"" or ""low to very low."" Scores are calculated for each index; a value higher than 50 indicates more builders view conditions as good rather than poor.

The overall index value for October was 55, two points down from September's revised 57. September's index was originally reported at 58, flat with August.

Despite declining for the second straight month, the index has hovered above the neutral mark for five consecutive months now, and NAHB reports seeing signs of pent-up demand in many markets across the country.

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Furthermore, the association believes October's drop represents a temporary blip.

""A spike in mortgage interest rates along with the paralysis in Washington that led to the government shutdown and uncertainty regarding the nation's debt limit have caused builders and consumers to take pause,"" said NAHB chief economist David Crowe. ""However, interest rates remain near historic lows and we don't expect the level of rates to have a major impact on sales and starts going forward. Once this government impasse is resolved, we expect builder and consumer optimism will bounce back.""

All three index components experienced a two-point decrease in October. The component gauging current sales now stands at 58, the component measuring sales expectations in the next six months stands at 62, and the component gauging prospective buyer traffic now reads 44.

Regionally, the Midwest was the only area to report an increase in its HMI, posting a two-point gain to 65. Readings dropped four points in the South to 54 and five points in the West to 58. The Northeast had it the worst, reporting a 13-point decline to 31.

With the Census holding on to its housing starts data for September due to the partial federal shutdown, NAHB also prepared its own estimate for single- and multifamily starts.

The association estimates that single-family housing starts came to a seasonally adjusted annual rate somewhere between 620,000 and 630,000 units in September (continuing a rebound started in August), with multifamily starts at a rate between 255,000 and 270,000 (falling in line with this year's volatile movements).