The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) which measures builder confidence hit a six year high in September, marking the fifth month in a row that the index moved upward.  The HMI rose three points in September to reach 40, the highest reading since June of 2006.   Regional results rose as well as did the scores on the three indices underlying the HMI.

The HMI is based on a survey conducted monthly among NAHB's home builder members. The builders are asked to rank current home sales conditions as "good", "fair", or "poor" and to predict conditions six months hence on the same scale.  They are also asked to rank current buyer traffic as "high to very high," "average" or "low to very low".  A score of 50 on any of the components or the composite index indicates that more respondents view conditions as good than as poor.   

The component gauging current sales conditions rose 4 points to 42, the one measuring sales prospects over the next six months was up eight points to 51, and the component measuring traffic was up one point to 31. The present levels for this survey are revealing when compared to one year ago.  In September of 2011 all three components and the HMI all within a range of 11 to 17 and MND's article that month said that the HMI had been trading in a range between 13 and 16 for the previous six months.

"This fifth consecutive month of improvement in builder confidence provides further assurance that the housing market is moving in a positive direction, but there's still a long way to go on the road to recovery and several obstacles are slowing our progress," said NAHB Chairman Barry Rutenberg.  "In particular, unnecessarily tight credit conditions are preventing many builders from putting crews back to work - which would create needed jobs -- and discouraging consumers from pursuing a new-home purchase."

"Builders across the country are expressing a more positive outlook on current sales conditions, future sales prospects and the amount of consumer traffic they are seeing through model homes than they have in more than five years," noted NAHB Chief Economist David Crowe. "However, against the improving demand for new homes, concerns are now rising about the lack of building lots in certain markets and the rising cost of building materials. Given the fragile nature of the housing and economic recovery, these are significant red flags."

Builder confidence also rose across every region of the country in September. Looking at the three-month moving average for each region, the Midwest and West each registered five-point gains, to 40 and 43, respectively, while the South posted a four-point gain to 36 and the Northeast posted a two-point gain to 30.