PhotoAfter falling in July to its lowest level since last November, builder confidence in the market for newly-built single-family homes is on the rise again.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) shot up four points in August for a reading of 68.

“The fact that builder confidence has returned to the healthy levels we saw this spring is consistent with our forecast for a gradual strengthening in the housing market,” said NAHB Chief Economist Robert Dietz. “GDP growth improved in the second quarter, which helped sustain housing demand. However, builders continue to face supply-side challenges, such as lot and labor shortages and rising building material costs.”

The builders' view

The NAHB/Wells Fargo HMI, which is derived from a monthly survey, gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair,” or “poor.”

In addition, the survey asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

August saw all three HMI components post gains. The component gauging current sales conditions was up four points to 74, while the index charting sales expectations in the next six months jumped five points to 78. The component measuring buyer traffic inched up a single point to 49.

A look at the three-month moving averages for regional HMI scores shows the Northeast rose one point to 48, while the West, South and Midwest were unchanged at 75, 67 and 66, respectively.

“Our members are encouraged by rising demand in the new-home market,” said NAHB Chairman Granger MacDonald. “This is due to ongoing job and economic growth, attractive mortgage rates, and growing consumer confidence.”

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