Home builders’ confidence in the market for new single-family homes is at its highest level since January 2006.

Kent Hoover

Washington Bureau Chief

Home builders’ confidence in the housing market hit its highest level since January 2006, rising for the third month in a row.

The Housing Market Index compiled by the National Association of Home Builders and Wells Fargo jumped six points in July to 57. The index is based on current and expected sales of new single-family homes, as well as on how much traffic builders are seeing from prospective buyers.

“Builders are seeing more motivated buyers coming through their doors as the inventory of existing homes for sale continues to tighten,” said NAHB Chief Economist David Crowe. “Meanwhile, as the infrastructure that supplies home building returns, some previously skyrocketing building material costs have begun to soften.”

NAHB Chairman Rick Judson, a home builder from Charlotte, N.C., said July’s index “is particularly encouraging in that it shows improvement in builder confidence across every region.”

The only clouds on the horizon come from Washington, D.C. The home mortgage interest deduction could be scaled back as part of comprehensive tax reform, and legislation to reform Fannie Mae and Freddie Mac could reduce the federal role in the housing finance system.

Judson warns that “positive momentum” in the housing market “could be disrupted by threats on the policy side.”