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Index: U.S. home builder confidence at 7-year high

Builders are growing optimistic as steady hiring, low

Builders are growing optimistic as steady hiring, low mortgage rates and shrinking existing-home inventories spur construction. (June 15, 2013) Photo Credit: Bloomberg

U.S. home builders are feeling more optimistic about their home sales prospects than they have in more than seven years, a trend that suggests home construction will accelerate in coming months.

The National Association of Home Builders/Wells Fargo builder sentiment index released Tuesday jumped to 57 this month from 51 in June.

It was the third consecutive monthly gain.

A reading above 50 indicates more builders view sales conditions as good, rather than poor. The index hasn't been that high since January 2006, well before the housing market crashed.

Measures of customer traffic, current sales conditions and builders' outlook for single-family home sales over the next six months vaulted to their highest levels in at least seven years.

"Builders are seeing more motivated buyers coming through their doors as the inventory of existing homes for sale continues to tighten," said David Crowe, the NAHB's chief economist.

The latest confidence index, based on responses from 281 builders, points to continued improvement for new home construction, which remains a key source of growth for the economy.

Last month, Federal Reserve Chairman Ben Bernanke cited housing gains as a major reason the Fed's economic outlook has brightened.

Steady hiring and low mortgage rates have encouraged more people to buy homes over the past year. But the inventory of previously occupied homes on the market has declined sharply in many markets. On a national level, it was down 10 percent in May from prior-year levels as sales rose to an annual rate of 5.18 million.

With demand up, prices rising and fewer homes on the market, builders have grown more optimistic about their prospects, stepping up construction. In May, builders applied for permits to build single-family homes at the fastest pace in five years.

On a regional basis, confidence grew across the board, but posted the strongest among builders in the Midwest.

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