With mortgage rates near 7 percent, many homeowners have little incentive to sell their homes, and new listings are down 27 percent from a year ago, according to Realtor.com.

That has boosted interest in new homes and given builders reason to remain confident about the outlook. The National Association of Home Builders (NAHB) said Tuesday that its monthly confidence index rose one point to 56 in July.

It was the seventh consecutive month of improvement in builder sentiment and the highest level since June 2022, it said.

A year ago, the index stood at 55.

KEY DETAILS Builders continue to reduce sales incentives amid strong homebuyer interest. The percentage of builders cutting prices to boost sales fell from a peak of 36% in November 2022 to 22% in July.

The three indicators that underpin the overall Builder Confidence Index are mixed:

Builders are optimistic about current sales conditions. The index rose 1 point.

They are not optimistic about future sales. The Index declined 2 points.

Builders are also seeing a steady flow of potential buyers. The index increased 3 points.

Trends: New homes have been a bright spot in the real estate market over the past few months, as builders have been able to meet the demand for purchases in the face of a scarcity of secondary listings.

But builders are also worried about how much longer they can hold out, as they say they foresee possible obstacles, such as a shortage of building lots and a lack of electrical substations, that could slow construction. They are also concerned that a rise in mortgage rates to 7% could hurt demand.

NAHB's View "While builders continue to be cautiously optimistic about market conditions, the quarter-point rise in mortgage rates over the past month is a clear reminder that the market is in for a walk in the park as the Federal Reserve's ongoing tightening cycle draws to a close," Robert Dietz, NAHB's chief economist, said in a statement said.

MARKET REACTION: The yield on the 10-year Treasury note was about 3.7 percent Tuesday morning.

The SPDR Standard & Poor's Homebuilders exchange-traded fund was higher in the morning session, as were shares of large homebuilders such as D.R. Horton Inc, Toll Brothers and Lennar.