Builders of single-family homes are feeling increasingly optimistic about the outlook for their industry, even as the overall housing market continues to struggle.

Builder confidence in the market for new construction of single-family homes has increased for a third consecutive month in August, rising two points to a mark of 55 on the National Association of Home Builders/Wells Fargo Housing Market Index, released today.

That's the highest mark the index has registered since January. The rising optimism comes even as overall home sales continue to lag behind their pace of one year ago, according to the National Association of Realtors, and pending sales fell in June after several monthly increases.

Rising employment bringing more buyers

"As the employment picture brightens, builders are seeing a noticeable increase in the number of serious buyers entering the market," said Kevin Kelly, NAHB chairman. "However, builders still face a number of challenges, including tight credit conditions for borrowers and shortages of finished lots and labor."

Of the three elements that make up the index, builders are most optimistic about future sales. That indicator rose two points in August to a reading of 65, while their view of current sales conditions also rose two points, to 58.

Potential buyer traffic remains weak, but improving. The gage of that element of the index rose 3 points in August but still registered only 42 on the 100-point scale.

"Each of the three components of the HMI registered consecutive gains for the past three months, which is a positive sign that builder confidence appears to be firming following an uneven spring," said David Crowe, NAHB chief economist. "Factors contributing to this rise include sustained job growth, historically low mortgage rates and affordable home prices, which are helping to unleash pent-up demand."

The outlook for all four major regions of the nation has improved over the past three months, according to the index, with builders in the West and Midwest registering the most optimism and those in the Northeast significantly more pessimistic.

Published on August 18, 2014