Confidence among US homebuilders in July reached its highest level since March 2007, anticipating that new home sales will strengthen this year.

The National Association of Home Builders/Wells Fargo confidence index increased 6 points to 35 this month, the biggest gain since September 2002. The index, based on responses from 318 builders, has declined only once between January and July.

Builders still have their reservations, though; any reading below 50 indicates negative sentiment about the housing market, and the index has not hit 50 since the apex of the housing boom in April 2006.

However, the survey shows that builders are optimistic about sales as cheaper mortgage rates and lower home prices make home-buying more appealing.

“Combined with the upward movement we’ve seen in other key housing indicators over the past six months, this report adds to the growing acknowledgement that housing – though still in a fragile stage of recovery – is returning to its more traditional role of leading the economy out of recession,” said NAHB Chief Economist David Crowe in a statement.

This month, the measure of present single-family home purchases was 37, the highest since February 2007. In response to increased demand, builders have been boosting construction on single-family homes, Bloomberg reports. In May, homebuilders requested the most permits to start projects in 3 1/2 years.

Confidence improved across all four regions, with the Northeast measure of confidence at 36, up from 28 in June; 44 in the West from 32; 34 in the Midwest from 31; and 32 in the South from 27.

Despite the gains, the seasonally adjusted annual rate of sales is 369,000 homes, about half the pace that would be considered healthy.

Although new homes represent less than 20 percent of sales in the housing market, they have a larger impact on the economy, The Associated Press reports. Each home built creates on average three jobs for a year and generates roughly $90,000 in tax revenue, according to Home Builders’ data.

 

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