The National Association of Homebuilders (NAHB) announced on Thursday its housing market index (HMI) rose one point to 66 in August.

Economists had forecast the HMI to stay at 65.

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

Two out of the three HMI components were higher this month. The indicator gauging current sales conditions increased two points to 72 and the component measuring traffic of prospective buyers moved up two points to 50. Meanwhile, the measure charting sales expectations in the next six months dropped one point to 70.

NAHB Chairman Greg Ugalde said: “Even as builders report a firm demand for single-family homes, they continue to struggle with rising construction costs stemming from excessive regulations, a chronic shortage of workers and a lack of buildable lots.”

Meanwhile, NAHB Chief Economist Robert Dietz noted: “While 30-year mortgage rates have dropped from 4.1% down to 3.6% during the past four months, we have not seen an equivalent higher pace of building activity because the rate declines occurred due to economic uncertainty stemming largely from growing trade concerns. Although affordability headwinds remain a challenge, demand is good and growing at lower price points and for smaller homes.”