Builder confidence has set another recent benchmark, hitting the highest point on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) in nearly eight years. The index, a measure of builder confidence in the market for newly constructed single-family homes rose three points in August to 59. This was the fourth consecutive monthly gain.

"Builders are seeing more motivated buyers walk through their doors than they have in quite some time," said NAHB Chairman Rick Judson. "What's more, firming home prices and thinning inventories of homes for sale are contributing to an increased sense of urgency among those who are in the market."

NAHB surveys its residential builder members each month, asking them about their perceptions of the current market for single family homes and to quantify their expectations for sales over the next six months as "good," "fair," or "poor." Builders are also asked to rate traffic of potential buyers as "high to very high," "average" or "low to very low." Responses are used to construct three seasonally adjusted indexes of builder confidence as well as a composite index. A number of 50 on any of the indexes indicates that more builders view conditions as good than view them as poor.

The composite index fell below 50 in June 2006 and stayed below that breakeven mark for the next 84 months, dropping as low as 8 in January 2009. It returned to positive territory only two months ago.

Two of the three component indexes rose in August. The component reflecting current sales conditions increased three points to 62 and the component measuring expectations over the next six months was up one point to 68. Builder perceptions of current buyer traffic was unchanged from July at 45.

"Builder confidence continues to strengthen along with rising demand for a limited supply of new and existing homes in most local markets," noted NAHB Chief Economist David Crowe. "However, this positive momentum is being slowed by the ongoing headwinds of tight credit and low supplies of finished lots and labor."

All but one region saw a gain in its three-month moving average HMI score in August. The Midwest and West each posted six-point increases, to 60 and 57, respectively, while the South posted a four-point gain to 54 and the Northeast held unchanged at 39.