Builders of new single family homes continue to grow more confident about the market for their product according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market survey for December.  The Housing Market Index (HMI) derived from the survey rose two points to 47 marking the eighth consecutive monthly gain and the highest level for the index since April 2006.

The HPI and its component indices are based on responses of NAHB's home builder members to a series of questions on new home sales activity.  They are asked to gauge the current level of single family home sales and their expectation for sales over the next six months each on a scale of "good," "fair" or "poor" and to rate traffic of prospective buyers as "high to very high," "average" or "low to very low."

Scores from each component are then used to calculate an index and combined into a seasonally adjusted composite (the HMI).  A number over 50 for the index or any of its components indicates that more builders view sales conditions as good than poor. 

Two of the HMI's three component indexes are now above the critical midpoint of 50. The component gauging current sales expectations rose two points to 51 in December, while the component gauging sales expectations in the next six months slipped one point, to 51. The component measuring traffic of prospective buyers increased one point, to 36.

"Builders across the country are reporting some of the best sales conditions they've seen in more than five years, with more serious buyers coming forward and a shrinking number of vacant and foreclosed properties on the market," observed NAHB Chairman Barry Rutenberg.   "However, one thing that is still holding back potential home sales is the difficulty that many families are encountering in getting qualified for a mortgage due to today's overly stringent lending standards."

"While there is still much room for improvement, the consistent upward trend in builder confidence over the past year is indicative of the gradual recovery that has been taking place in housing markets nationwide and that we expect to continue in 2013," noted NAHB Chief Economist David Crowe.

The increase in confidence was evidenced in three of the four regions with the fourth, the West, unchanged from November at an index of 47.  The HMI increased three points to 46 in the South, three points to 48 in the Midwest, and four points to 35 in the Northeast.  The levels in each region are up a minimum of 100 percent compared to one year earlier