U.S. home-builders are feeling slightly less confident in their sales prospects, but their overall sales outlook remains favorable.
The National Association of Home Builders/Wells Fargo builder sentiment index, released Monday, slipped to 53 this month, down two points from 55 in February. Though it’s the third consecutive monthly decline for the index, readings above 50 indicate more builders view sales conditions as good rather than poor.
Labor shortages, a dearth of available land parcels cleared for new-home construction and tougher mortgage-lending standards weighed on builders’ confidence this month, said David Crowe, the builder group’s chief economist.
“These obstacles notwithstanding, we are expecting solid gains in the housing market this year, buoyed by sustained job growth, low mortgage interest rates and pent-up demand,” Crowe added.
Despite the increasingly favorable economy, home sales have been sluggish so far this year, after a lackluster 2014.
Sales of new U.S. homes were basically flat in January, slipping 0.2 percent from the previous month to a seasonally adjusted annual rate of 481,000. Sales climbed 5.3 percent from a year earlier, when harsh winter weather caused home-buying to stall.
Still, lower mortgage rates and job gains over the past year are among the factors pointing to stronger sales this spring buying season, traditionally the peak period for home sales.
Mortgage rates remain near historic lows. The average 30-year fixed mortgage rate was 3.86 percent last week, according to mortgage giant Freddie Mac. A year ago, it stood at 4.37 percent.
Meanwhile, employers have stepped up hiring. The economy added a solid 295,000 jobs last month, helping to bring down the national unemployment rate to a seven-year low of 5.5 percent. More Americans earning paychecks should eventually push home sales higher.
The latest NAHB index was based on responses from 346 builders. Its measure of current sales conditions fell three points to 58, while a gauge of traffic by prospective buyers declined two points to 37. Builders’ outlook for sales over the next six months held steady at 59.
Though new homes represent only a fraction of the housing market, they have an outsized impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB data.