"The favorable interest rate environment, in which rates on long-term mortgages recently have been hovering around 6.7 percent, is encouraging many prospective home-buyers to take the plunge," said NAHB President Gary Garczynski, a builder/developer from Woodbridge, Va.

"Ongoing increases in house values have also been fueling housing demand. Home builders certainly have good reasons to be confident," he added.

The HMI is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years.

Home builders are asked to rate current sales of single-family homes and sales expectations for the next six months as "good," "fair" or "poor." They are also asked to rate traffic of prospective buyers as either "high to very high," "average" or "low to very low."

Scores for responses to each component are used to calculate a seasonally adjusted index, where any number over 50 indicates that more builders view sales conditions as good than poor.

June's HMI remained unchanged from May's index, which was revised downward by a single point to 60. The indexes gauging current sales and sales expectations for the next six months were each unchanged, at 65 and 68, respectively, while the index gauging traffic of prospective buyers rose one point to 44.

"The market for new single-family homes will likely continue on a strong note in the second half of 2002," said NAHB Chief Economist David Seiders. "NAHB's latest forecasts project about 1.3 million single-family starts for the year as a whole, up slightly from the 1.27 million units recorded last year.

"Thus, the single-family housing market should continue to provide good support to the economy as the budding cyclical recovery moves ahead."