According to the latest Wells Fargo Housing Market Index (HMI) released by the National Association of Home Builders, builder confidence in the market for newly-built single-family homes rose one point (66) in August. In recent months, a solid sentiment level of 64-to-66 has held up in spite of growing industry hurdles.

“Even as builders report a firm demand for single-family homes, they continue to struggle with rising construction costs stemming from excessive regulations, a chronic shortage of workers and a lack of buildable lots,” said NAHB chairman Greg Ugalde, a home builder and developer from Torrington, Conn.

In spite of all this, 30-year mortgage rates have dropped from 4.1% to 3.6% in the last four months according to NAHB chief economist Robert Dietz.

“We have not seen an equivalent higher pace of building activity because the rate declines occurred due to economic uncertainty stemming largely from growing trade concerns,” Dietz said. “Although affordability headwinds remain a challenge, demand is good and growing at lower price points and for smaller homes.”

The HMI is derived from an NAHB-monthly survey that gauges builder perceptions of current single-family home sales and sales expectations for the next 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.” The seasonally adjusted index is then calculated from each component. Any number over 50 indicates that more builders view conditions as good rather than poor.

The HMI index gauging current sales conditions (73) and the component measuring traffic of prospective buyers (50) rose by two points each while the measure charting sales expectations in the next six months fell one point to 70.

The past-three-month regional HMI scores for the South (69), West (73) and Midwest (57) were up one point while the Northeast fell three points to 57.

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