PhotoDespite a slight decline in the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence in the market for newly-built single-family homes remains on firm ground.

The two-point slip from May took the HMI to a reading of 67. Any number over 50 indicates that more builders view conditions as good than poor.

“Builder confidence levels have remained consistently sound this year,” said NAHB Chairman Granger MacDonald, “reflecting the ongoing gradual recovery of the housing market.”

Checking the numbers

The NAHB/Wells Fargo Housing Market Index, 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.”

The survey also 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.

All three HMI components lost ground in June but remain at healthy levels. The components gauging current sales conditions fell two points to 73, the index charting sales expectations in the next six months also dropped two points to 76, and the component measuring buyer traffic fell two points to 49.

Regarding the three-month moving averages for regional HMI scores, the Midwest and South each were one point lower to 67 and 70, respectively. The Northeast and West both dropped two points  -- to 46 and 76, respectively.

“As the housing market strengthens and more buyers enter the market, builders continue to express their frustration over an ongoing shortage of skilled labor and buildable lots that is impeding stronger growth in the single-family sector” said NAHB Chief Economist Robert Dietz.

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