Builder confidence across the United States declined for the first time in four months in October 2014 falling to 54 points, according to the National Association of Home Builders.
The NAHB calculates builder confidence on a monthly basis using the NAHB/Wells Fargo Housing Market Index (HMI).
The index is a sample based on perceptions of 300 or more builders, which helps determine current housing trends and predict demand in the single-family homes segment only. The survey polls builders on current single-family home sales, sales expectations in the next six months and expected traffic of potential buyers.
For October, the HMI dropped in all the three areas. The index measuring current sales decreased six points to 57, the index gauging future sales expectations fell three points to 64 and the index that analyzed traffic of potential buyers declined six points to 41.
Experts say that the decline is a seasonal trend as home buying activity usually starts drying up in September. Also, the figures don't show a tremendous slump which means the housing recovery was on the right track.
"We are seeing a return to the mid-50s index level trend established earlier in the summer, which is in line with the gradual pace of the housing recovery," Kevin Kelly, chairman of NAHB, said in a statement.
"After the HMI posted a nine-year high in September, it's not surprising to see the number drop in October. However, historically low mortgage interest rates, steady job gains, and significant pent up demand all point to continued growth of the housing market," David Crowe, chief economist of the association, said adding that since the index had reached a nine-year high in September, the fall was not a surprise.
The U.S. housing market posted strong growth in 2012 and 2013. However, the cold freeze in the first few months of 2014 put a damper on the recovery. Spring and summer also didn't see as much growth, but was comparatively better.
Mortgage rates have reached record lows and price appreciation is only inching forward at a sluggish pace. The factors make for a great housing climate, but unless the economy ensures steady growth, the recovery could be restrained.
Industry analysts are hoping for a slow start in 2015.
"...we doubt that the dysfunction in the housing market will be resolved quickly enough to allow more than a 10% increase in sales volume next year," analysts at Barclays wrote in a report cited by The Wall Street Journal.
