NAHB Housing Market Index rises in August

Low interest rates and strong consumer demand combined to boost the housing market in August. According to a National Association of Home Builders news release, the NAHB Housing Market Index moved up six points from 56 in July to 62, in August, the highest reading this year.

"Mortgage interest rates have declined by about 20 basis points in the last month to stand at 7 percent, their lowest level since March," said NAHB President Bruce Smith. "With demand for housing on the upswing, and many builders grappling with a shortage of labor and building lots, home prices across much of the nation are rising. Home buyers are taking note, preferring to invest in housing rather than in the declining stock market."

The HMI is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years. Home builders are asked to rate current sales of single-family homes and sales expectations for the next six months as "good," "fair," or "poor."

They are also asked to rate traffic of prospective buyers as either "high to very high," "average," or "low to very low."

Scores for responses to each component are used to calculate a seasonally adjusted overall index, where any number over 50 indicates that more builders view sales conditions as good than poor.

All three components of the HMI rose in August to their highest levels for the year. The index that tracks present single-family home sales posted the largest gain of seven points to stand at 68. The index predicting expected sales for the next 6 months increased three points to 69 while the index rating traffic of prospective buyers posted a five-point gain at 45.