The NAHB housing market index (HMI), a gauge of homebuilder sentiment, climbed to 59 in August.
Economists polled by Bloomberg were looking for homebuilder confidence to hold steady at 57.
July’s reading was revised down to 56.
A reading over 50 shows that more builders think sales conditions are good rather than poor.
A regional breakdown showed that the three-month average in homebuilder confidence climbed to 60 in the Midwest, 57 in the West, 54 in the South, and was unchanged at 39 in the Northeast.
“Builders are seeing more motivated buyers walk through their doors than they have in quite some time,” NAHB Chairman Rick Judson said in a press release.
“What’s more, firming home prices and thinning inventories of homes for sale are contributing to an increased sense of urgency among those who are in the market.”
But they do expect tightening credit and low supply of labour and finished lots to weigh on the momentum in homebuilder confidence.
Two of three sub-components of the HMI increased in July.
- The sub-index gauging current sales climbed 3 points to 62.
- The sub-index gauging expectations for the next six months increased by one point to 68.
- The sub-index gauging the traffic of prospective buyers held steady at 45.
Investors track this index because it is a leading indicator for housing starts. Though some like Paul Diggle at Capital Economics argue that NAHB has a “history of over-exuberance as a predictor of starts.”