Builders' confidence in the market for new single-family homes soared as the National Association of Home Builders' housing market index — a monthly gauge of builder sentiment — rose to 57 in July from a revised 51 in June, originally reported as 52.

Thomson Reuters' poll of economists predicted the index would hold at 52.

"Today's report is particularly encouraging in that it shows improvement in builder confidence across every region as well as solid gains in current sales conditions, traffic of prospective buyers and sales expectations for the next six months," according to NAHB Chairman Rick Judson. "This positive momentum could be disrupted by threats on the policy side, particularly with regard to the mortgage interest deduction and federal support for the housing finance system."

"Builders are seeing more motivated buyers coming through their doors as the inventory of existing homes for sale continues to tighten," said NAHB Chief Economist David Crowe. "Meanwhile, as the infrastructure that supplies home building returns, some previously skyrocketing building material costs have begun to soften."

Derived from a monthly survey that NAHB has been conducting for 25 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as either "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 sales conditions as good than poor.

The current single-family home sales index rose to 60 from 55, its best reading in seven years; the sales expectations index for the next six months jumped to 67 from 60; and the traffic of prospective buyers index climbed to 45 from 40, its highest level in almost eight years.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.