U.S. builder confidence improves much more than forecast in July

The National Association of Homebuilders (NAHB) announced on Thursday its housing market index (HMI) climbed 14 points to 72 in July from an unrevised June reading of 58. This was the highest reading since March (before the coronavirus outbreak affected much of the U.S.).

Economists had forecast the HMI to increase to 60.

A reading over 50 indicates more builders view conditions as good than poor.

All three HMI components registered gains this month. The indicator gauging current sales conditions jumped 16 points to 79 in July, while the component measuring traffic of prospective buyers climbed 15 points to 58 and the measure charting sales expectations surged 7 points to 75.

NAHB Chairman Chuck Fowke noted: “Builders are seeing strong traffic and lots of interest in new construction as existing home inventory remains lean. Moreover, builders in the Northeast and the Midwest are benefiting from demand that was sidelined during lockdowns in the spring. Low interest rates are also fueling demand, and we expect housing to lead an overall economic recovery.”

Meanwhile, NAHB Chief Economist Robert Dietz said: “While the housing market is clearly rebounding, challenges exist. Lumber prices are at a two-year high and builders are reporting rising costs for other building materials while lot and skilled labor availability issues persist. Nonetheless, the important story of the changing geography of housing demand is benefiting new construction. New home demand is improving in lower density markets, including small metro areas, rural markets and large metro exurbs, as people seek out larger homes and anticipate more flexibility for telework in the years ahead. Flight to the suburbs is real.”