Homebuilders' optimism increased as low mortgage rates fueled demand. However, affordability constraints and the continuing scarcity of construction workers and land parcels remain concerns.
Confidence in the market for new single-family housing inched up a point month-over-month in July to 65, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
However, July's index reading is lower than the year-ago level of 68.
"Builders report solid demand for single-family homes. 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," said Greg Ugalde, NAHB chairman and a homebuilder and developer from Torrington, Conn.
The index oscillated in the low- to mid-60s range for the past six months. A reading above 50 suggests more builders view conditions as "good" than "poor."
"Even as builders try to rein in costs, home prices continue to outpace incomes," Robert Dietz, NAHB's chief economist, said in the press release. "The current low mortgage interest rate environment should be getting more buyers off the sidelines, but they remain hesitant due to affordability concerns. Still, attractive rates should help spur new home purchases in large metro suburban markets, where approximately one-third of new construction takes place."
Regionally, confidence is highest in the West and South.
The West's reading of 75 is up six points from June and one point year-over-year, and the South's index of 69 was up one point month-over-month, but down a point from a year ago.
The Northeast's score of 57 marks a decline of two points from the previous month but is up one point from last year.
The Midwest was the only region to decrease in both time frames, dropping four points from June and nine from the year prior.
