- Decline reflects less optimism about current, future sales
- Builders see strongest buyer traffic in more than 10 years
Confidence among U.S. homebuilders eased in November from a decade-high, indicating some cooling in the housing market.
The National Association of Builders/Wells Fargo sentiment gauge unexpectedly fell to 62 this month from a revised 65 in October, the highest level since October 2005, the Washington-based group reported Tuesday. Readings above 50 mean more respondents said conditions were good.
The housing market may be plateauing at a robust pace as high rental costs and mortgage rates at historic lows push more Americans to purchase a home. Powered by an improving job market, consumers are keeping the U.S. economy on track as they continue to spend on big-ticket items such as cars and homes, indicating little risk of recent global uncertainty translating into the housing sector.
Sustained readings greater than 60 are “a sign that the single-family housing market is making long-term headway,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Missouri. “However, our members continue to voice concerns about the availability of lots and labor.”
The homebuilder index’s reading for October was revised up from a previously reported 64. The median forecast in a Bloomberg survey of 46 economists called for the gauge to maintain that level in November. Estimates in the survey ranged from 60 to 66.
Confidence fell in two of the four U.S. regions, with builders in the South showing the biggest setback. Confidence was little changed in the Northeast and rose in the West.
The homebuilders’ gauge of current single-family sales declined to 67 in November from 70 the month before, while the measure of the six-month sales outlook fell to 70 from 75, the highest level since August 2005. A gauge of prospective buyer traffic climbed to 48 from 47 the month prior.
A strong month in the job market has helped fuel demand for residential real estate, ensuring building will contribute to economic growth while the manufacturing sector continues to flounder. Employers added 271,000 workers to payrolls in October, the largest monthly gain this year, while the jobless rate fell to a seven-year low of 5 percent. Higher wages are giving workers more money for a down payment, as average hourly earnings climbed by the most since 2009 in the past month.
Low borrowing costs are encouraging more renters to become homeowners. The average 30-year, fixed-rate mortgage was 3.98 percent in the week ended Nov. 12, compared with an average of 4.17 percent in 2014 and 6.15 percent in the previous expansion.
A Commerce Department report due on Wednesday may show housing starts decreased to a 1.16 million annualized pace in October from 1.21 million the month prior, according to a median forecast in a Bloomberg survey. The September reading was the second-highest level since 2007.