A report released by the National Association of Home Builder on Tuesday unexpectedly showed a modest increase in U.S. homebuilder confidence in the month of October.
The report said the NAHB/Wells Fargo Housing Market Index inched up to 68 in October from 67 in September. Economists had expected the index to come in unchanged.
“Builders are motivated by solid housing demand, fueled by a growing economy and a generational low for unemployment,” said NAHB Chairman Randy Noel.
He added, “Builders are also relieved that lumber prices have declined for three straight months from elevated levels earlier this summer, but they need to manage supply-side costs to keep home prices affordable.”
The unexpected uptick by the headline index was partly due to a jump by the component charting buyer traffic, which surged up to 53 in October from 49 in September.
The components measuring current sales conditions and expectations in the next six months both edged up by one point to 74 and 75, respectively.
“Favorable economic conditions and demographic tailwinds should continue to support demand, but housing affordability has become a challenge due to ongoing price and interest rate increases,” said NAHB Chief Economist Robert Dietz.
He added, “Unless housing affordability stabilizes, the market risks losing additional momentum as we head into 2019.”
On Wednesday, the Commerce Department is scheduled to release a separate report on new residential construction in the month of September.
Housing starts are expected to drop to an annual rate of 1.237 million in September after spiking to a rate of 1.282 million in August.