The National Association of Home Builders/Wells Fargo Housing Market Index dipped two points in October to a reading of 63, compared to 65 in September, the NAHB reported on Tuesday.
Current sales conditions dropped two points from September to 69 in October, while buyer traffic fell one point to 46 for the same period. Sales expectations for the next six months increased by one point during the month to a score of 72.
October’s reading marks the second-highest HMI score so far this year.
NAHB Chairman Ed Brady cited lot and labor shortages amid overall stability in builder confidence as the reason for the Index’s slight reduction in October. Last month, the Index reached its highest level since October 2015, indicating continued progress in the housing market’s recovery.
Still, a well-documented lack of available skilled labor and the limited lot inventory is expected to slow down new construction activity, keeping its growth rate at 10% to 12% annually, NAHB Chief Economist Robert Dietz told Construction Dive earlier this month. here’s only so many addition lots that can be added to the system,” he said. “If you don’t have that volume growth for construction, it’s hard to get the increase in scope of the kinds of homes being offered into the market. It’s a multiyear process. It’s just part of the recovery that’s been taking place.
Meanwhile, existing-home inventory is tight, raising prices as cost-sensitive first-time buyers attempt to enter the market. The National Association of Realtors reported that existing home sales dipped 0.9% from July to August, while prices were up 5.1% year-over-year in August 2016. Overall, U.S. housing inventory was down 7% in the third quarter from a year ago, with starter and trade-up homes taking even more of a hit.
However, low mortgage rates and the HMI’s promising future-sales forecast should help maintain single-family gains going forward, Dietz said.
The HMI is the first in a slew of housing market reports, with existing-home sales on Thursday and housing starts on Friday followed by new and pending home sales later next week.
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