Builder confidence in the market for new single-family homes has risen by 14 points this month, up to a reading of 72 on the NAHB/Wells Fargo Housing Market Index report. This matches the solid pre-pandemic reading recorded in March before the COVID-19 outbreak began.

“Builders are seeing strong traffic and lots of interest in new construction as existing home inventory remains lean,” says NAHB chairman Chuck Fowke. “Moreover, 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.”

The NAHB/Wells Fargo HMI is derived from a monthly survey of builders that gauges sales expectations and traffic of prospective buyers as a measure of industry confidence. A score over 50 in a given category signals that more builders view conditions as good than as poor.

All of the HMI’s individual indices showed strong gains in July. The current sales conditions index rose by 16 points to 79, the sales expectations index rose seven points to 75, and the prospective buyers traffic index rose 15 points to 58.

Among the monthly average regional scores, the Northeast housing market index rose by 22 points to 70, while the Midwest rose 18 points to 68, the South rose 10 points to 73, and the West rose 14 points to a reading of 80.

“While the housing market is clearly rebounding, challenges exist,” says NAHB chief economist Robert Dietz. “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. 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. Flight to the suburbs is real.”