WASHINGTON - Builder confidence in new home construction reached a seven-year high in June, signaling improved economics in the U.S. market.

Newly-built single-family homes rose eight points to a reading of 52 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released June 17.

“This is the first time the HMI has been above 50 since April 2006, and surpassing this important benchmark reflects the fact that builders are seeing better market conditions as demand for new homes increases,” NAHB Chairman Rick Judson, a home builder and developer from Charlotte, NC, said in a statement. “With the low inventory of existing homes, an increasing number of buyers are gravitating toward new homes.”

Readings over 50 indicate a majority of builders view sales conditions as good. According to NAHB, the eight-point jump in the index was the biggest one-month gain since August and September of 2002, when the HMI recorded a similar increase.

“Builders are experiencing some relief in the headwinds that are holding back a more robust recovery,” said NAHB Chief Economist David Crowe. “Today’s report is consistent with our forecast for a 29 percent increase in total housing starts this year, which would mark the first time since 2007 that starts have topped the 1 million mark.”

The HMI indexes gauging current and future sales conditions also rose, as did the gauge of prospective buyer traffic.

Have something to say? Share your thoughts with us in the comments below.