The monthly index measuring builders’ market confidence surged 14 points higher in July to 72. It’s not only a strong reading – any number over 50 suggests optimism – it’s also at the high level it hit in March before the pandemic affected most of the nation.

WASHINGTON – In a strong signal that the housing market is ready to lead a post-COVID economic recovery, builder confidence in the market for newly-built single-family homes jumped 14 points to 72 in July, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

The HMI has now completely rebounded to its already solid pre-pandemic reading in March before the COVID-19 outbreak affected much of the nation.

“Builders are seeing strong traffic and lots of interest in new construction as existing home inventory remains lean,” says NAHB Chairman Chuck Fowke, a custom home builder from Tampa. “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.”

However, NAHB Chief Economist Robert Dietz says builders still face some challenges.

“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,” Dietz says. “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.”

According to Dietz, “Flight to the suburbs is real.”

All the HMI indices that make up the full index posted gains in July. The index gauging current sales conditions jumped 16 points to 79, the component measuring sales expectations in the next six months rose seven points to 75, and the measure charting traffic of prospective buyers posted a 15-point gain to 58.

By region of the U.S., the Northeast surged 22 points to 70, the Midwest jumped 18 points to 68, the South increased 10 points to 73 and the West increased 14 points to 80.

The NAHB/Wells Fargo Housing Market Index 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.

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