The National Association of Homebuilders (NAHB) announced on Tuesday its housing market index (HMI) rose one point to 65 in July.

Economists had forecast the HMI to stay at 64.

A reading over 50 indicates more builders view conditions as good than poor.

All three HMI components were higher this month. The indicator gauging current sales conditions increased one point to 72, the measure charting sales expectations in the next six months rose a single point to 71 and the component measuring traffic of prospective buyers moved up one point to 48.

NAHB Chairman Greg Ugalde said: “Builders report solid demand for single-family homes. However, they continue to grapple with labor shortages, a dearth of buildable lots and rising construction costs that are making it increasingly challenging to build homes at affordable price points relative to buyer incomes”.

Meanwhile, NAHB Chief Economist Robert Dietz noted: “Even as builders try to rein in costs, home prices continue to outpace incomes. The current low mortgage interest rate environment should be getting more buyers off the sidelines, but they remain hesitant due to affordability concerns. Still, attractive rates should help spur new home purchases in large metro suburban markets, where approximately one-third of new construction takes place”.