Builder confidence for newly built single-family homes rose to 65 points in July, according to data released Tuesday by the National Association of Home Builders (NAHB) and Wells Fargo.

The Housing Market Index (HMI) is a weighted average of separate indices for three single-family data points. It asks respondents to rate the market conditions for the sale of new homes at present and in the next six months, as well as the traffic of prospective buyers of new homes. It falls in a range of 0-100.

Confidence has been fairly stable in the past six month — it dipped slightly last month but held steady between 62 and 66 points since February. Nonetheless, sentiment is far below the 68 score in July 2018. The current results show that builders are cautiously, if not overly, optimistic.

“Builders report solid demand for single-family homes,” said NAHB Chairman Greg Ugalde in a prepared statement. “However, they continue to grapple with labor shortages, a dearth of buildable lots and rising construction costs that are making it increasingly challenging to build homes at affordable price points relative to buyer incomes.”

The HBI is made up of three components — the index measuring current sales conditions rose one point to 72, sales expectations over the next six months rose one point to 71 while buyer traffic rose to 48. Anything above 50 points is considered to be positive.

“Even as builders try to rein in costs, home prices continue to outpace incomes,” said NAHB Chief Economist Robert Dietz in a prepared statement. “The current low mortgage interest rate environment should be getting more buyers off the sidelines, but they remain hesitant due to affordability concerns.”

Email Veronika Bondarenko

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