Builder's demonstrated the highest confidence in the market for newly built homes in nearly a year this month as the Housing Market Index (HMI) published by the National Association of Home Builders and Wells Fargo Bank sprung to a five point gain.  Two of the HMI's component indices reached the highest levels in nearly a decade. 

The HMI rose to 59, the highest reading since September 2014 in June as builders, according to NAHB Chairman Tom Woods, reported "more serious and committed buyers at their job sites."  This is reflected, Woods said "in recent government data showing that new-home sales and single-family construction are gaining momentum."

"The HMI indices measuring current and future sales expectations are at their highest levels since the last quarter of 2005, indicating a growing optimism among builders that housing will continue to strengthen in the months ahead," said NAHB Chief Economist David Crowe. "At the same time, builders remain sensitive to consumers' ability to buy a new home."

The HMI is derived from a monthly survey conducted by NAHB among its builder members to measure their perceptions of current single-family home sales and their expectations for those sales over the upcoming six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "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 conditions as good than poor.  NAHB has conducted the survey for over 30 years.

All three components of the composite index posted healthy gains in June. The component gauging current sales conditions jumped seven points to 65 and the index charting sales expectations in the next six months increased six points to 69.  These were the highest readings for the components since November and October 2005 respectively.  The component measuring buyer traffic rose five points to 44, tied with January for the highest index reading this year.

Looking at the three-month moving averages for regional HMI scores, the South and Northeast each rose three points to 60 and 44, respectively. The West posted a two-point gain to 57 while the Midwest dropped by one point to 54.