A four point jump in September has taken the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) to its highest reading since November of 2005.  The increase, the fourth in as many months, elevated the composite measure of builder confidence in the market for new homes to 59.

The HMI is derived from responses new home builders give to a monthly survey which NAHB has conducted for 30 years.  Builders are asked for their perceptions of current single-family home sales and their expectations for those sales over the next six months ranked as "good," "fair" or "poor."  The survey also asks them to gauge current buyer traffic as "high to very high," "average" or "low to very low." Scores from each component are then used to calculate a seasonally adjusted composite index, the HMI.  Scores over 50 for the HMI or any of its components indicates that more builders view conditions as good than poor.

The index measuring current sales conditions rose five points to 63 and the one regarding future expectations was up two points to 67.  The measure of current traffic gained five points but at 47 remains below the milestone 50 level where it has been since September 2005.

"Since early summer, builders in many markets across the nation have been reporting that buyer interest and traffic have picked up, which is a positive sign that the housing market is moving in the right direction," said NAHB Chairman Kevin Kelly. 

NAHB Chief Economist David Crowe said that a firming job market is helping to free up some pent-up demand for new homes and increasing builder confidence, but first-time home buyers are still missing in action.  "Other factors impeding the pace of the housing recovery include persistently tight credit conditions for consumers and rising costs for materials, lots and labor."

The increase in builder confidence touched every region in September.  The three-month moving average for the Midwest registered a five-point gain to 59, the South posted a four-point increase to 56, the Northeast recorded a three-point gain to 41 and the West posted a two-point increase to 58.