U.S. builder confidence hits 7-year high in July

U.S. builder confidence for newly-built, single-family homes edged up to the highest level in more than seven years in July, a leading industry report said on Tuesday.

The builder sentiment index gained 6 points to 57 this month, the highest level since January of 2006, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). Any reading over 50 indicates that more builders view sales conditions as good rather than poor.

"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.

In July, all three HMI components posted gains. The component gauging current sales conditions increased 5 points to 60, the highest since early 2006. Meanwhile, the component measuring sales expectations for the next six months rose by 7 points to 67 and the component measuring traffic of prospective buyers gained 5 points to 45, both marking the strongest readings in more than seven years.

However, NAHB Chairman Rick Judson cautioned that this positive momentum could be disrupted by threats on the policy side, particularly with regard to the mortgage interest deduction and federal support for the housing finance system.

The average rate for the 30-year fixed mortgage rose to a two-year high to 4.51 percent last week, as markets speculated the U.S. Federal Reserve could reduce bond purchases later this year, according to the U.S. mortgage giant Freddie Mac.