US homebuilder’s confidence dropped in October

US Homebuilder’s confidence dropped in October after four consecutive months of gains, which had increased the indicator to its highest level in almost a decade.

On Thursday the National Association of Home Builders/Wells Fargo reported that the index dropped to 54 in October – after a reading of 59 in September.

A reading over 50 indicates that builders view sales conditions as good.

Analysts say that readings in the 50s are in line with the current recovery in housing.

In August new home sales rose to the highest pace since May 2008. However, activity is being slowed down a bit by lackluster wage growth and a price increase that has made many homes out of reach for consumers.

The index reveals that builder’s outlook for sales over the next six months and traffic by prospective buyers all dropped in October.

It should not pose a threat to housing prospects, with economists saying that it is still favorable in the coming months.

David Crowe, chief economist for the home builders, said:

“Historically low mortgage interest rates, steady job gains and significant pent up demand all point to continued growth of the housing market,”

The readings differed by region too. Builder sentiment was strongest in the Midwest (at 59), followed by the South (at 58), the West (at 57), and the Northeast far behind (at 41).

Mortgage rates reached a yearly low earlier this week. Freddie Mac reported that the US average for 30-year fixed-rate mortgages went down to 3.97 percent, from 4.12 percent the week before. This is the lowest level since June 20, 2013 – when 30-year mortgages were at 3.93 percent.

Builders began work on more homes in September and US consumers this month have been the most optimistic in seven years, a sign that the U.S. economy will continue to prosper, despite a global slowdown. Housing starts jumped by 6.3 percent to a 1.02 million annualized rate – up from a 957,000 pace in August.

Gus Faucher, an economist at PNC Financial Services Group Inc. in Pittsburgh, told Bloomberg:

“The fundamentals continue to look solid. The turmoil in the market doesn’t reflect the underlying U.S. economic fundamentals.”