U.S. homebuilder sentiment rose for a sixth month to a fresh six-year high in October, but recent momentum has eased in a sign of the challenges still facing the housing market, the National Association of Home Builders said on Tuesday.
The NAHB/Wells Fargo Housing Market index rose to 41 from 40 the month before, the group said in a statement. That was in line with the expectations of economists polled by Reuters and the highest the index has been since June 2006.
Readings below 50 mean more builders view market conditions as poor than favorable. The index has not been above 50 since April 2006.
"The slight gain in builder confidence this month is an indication that, while still moving forward, the speed at which the housing recovery is proceeding is being moderated by the various constraints such as tight credit, difficult appraisals and more recently, the limited inventory of buildable lots in certain markets," said NAHB chief economist David Crowe in a statement.
"These are the complicating factors that make it difficult for builder confidence to reach and surpass the 50-point mark, at which an equal number of builders view sales conditions as good versus poor."
The single-family home sales component was flat at 42 after gaining in recent months, NAHB said. The gauge of single-family sales expectations for the next six months was also flat at 51, while prospective buyer traffic rose to 35 from 30.
Builder confidence continued to improve in three out of four regions in October. Looking at three-month moving averages, the HMI gained two points in the Midwest and West to 42 and 44, respectively, and three points in the South, to 39. A three-month moving average for the Northeast’s HMI held unchanged at 29.
“The concern is that, even though demand for new homes is rising, overly tight credit conditions are still constraining new building and new purchases at a time when that kind of economic activity and the job growth it generates are greatly needed," said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla.
Reuters contributed to this report.
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