Dive Brief:

• Homebuilder confidence in the market for new single-family construction rebounded in August, jumping four points to a reading of 68 on the National Association of Home Builders/Wells Fargo Housing Market Index.

• NAHB Chairman Granger MacDonald said in a statement that builder optimism in the market — and the market itself — are strengthening on the back of rising demand brought on by job and economic growth, and competitive mortgage rates. 

• All three HMI sub-indices rebounded for the month, with current sales conditions rising four points to 74, sales expectations for the next six months increasing five points to 78 and buyer traffic inching up one point to 49.

Dive Insight:

Builder confidence took a turn in August, marking the first month of improvement in the outlook since May. While a strong economy is one driver, builders will continue to face supply-side challenges. A lag in labor along with a shortage of available land to develop and rising material prices will likely remain a drag on builders' ability to match demand for the near-term.

A positive employment report for the segment is further fueling optimism,  the residential construction sector added 5,100 new jobs in July. While material prices rose in June, prices on the closely monitored softwood lumber fell 3%, coming as a small relief to builders affected by the ongoing U.S.–Canada trade dispute. Trade duties on softwood lumber imported from Canada have brought higher prices and threatened material shortages.

Despite supply-side challenges, June's housing starts beat analyst expectations, creeping back up from their lowest levels in eight months in May. Building permit authorizations, which point to future construction activity, jumped more than 7%, another reason for builders to feel confident about future demand.

As the summer winds down, July's housing starts report released tomorrow by the Commerce Department will provide more details on current and upcoming residential construction activity.