Builder sentiment unexpectedly soured a little in July, according to the National Association of Homebuilders.
The NAHB's housing market index was 59 for the month. Economists had forecast that the gauge of sentiment was unchanged from June at 60, according to Bloomberg.
That was the highest level for the index this year.
All three components of the index — for current and future sales expectations, and buyer traffic — slipped in July.
"For the past six months, builder confidence has remained in a relatively narrow positive range that is consistent with the ongoing gradual housing recovery that is underway," said NAHB chairman Ed Brady in the release. "However, we are still hearing reports from our members of scattered softness in some markets, due largely to regulatory constraints and shortages of lots and labor."
The three-month averages of the regional indexes, which reduce some of the month-to-month volatility, were largely unchanged.
"The economic fundamentals are in place for continued slow, steady growth in the housing market," said NAHB chief economist Robert Dietz. These include low mortgage rates and the expectation for rising household formations.