Homebuilder confidence is on the rise

Homebuilders are the most optimistic they have been in more than five years as the housing sector remains a bright spot in the sluggish economic recovery. 

Confidence in the market for newly built, single-family homes rose six points to 35 in July, the largest one-month gain in nearly a decade, and the highest point since March 2007, according to the National Association of Home Builders/Wells Fargo Housing Market Index released on Tuesday. 

"Combined with the upward movement we've seen in other key housing indicators over the past six months, this report adds to the growing acknowledgment that housing, though still in a fragile stage of recovery, is returning to its more traditional role of leading the economy out of recession," said David Crowe, NAHB's chief economist. 

"This is particularly encouraging at a time when other parts of the economy have begun to show softness," he said. 

Still, the housing recovery faces challenges such as tight lending standards, incorrect appraisals and the continued flow of distressed properties onto the market.

"This is greater evidence that the housing market has turned the corner as more buyers perceive the benefits of purchasing a newly built home while interest rates and prices are so favorable," "said Barry Rutenberg, chairman of the NAHB and a home builder from Gainesville, Fla. 

Every component of the index showed gains in July. 

Current sales conditions and traffic of prospective buyers were each up six points, while the component gauging sales expectations for the next six months rose 11 points to 44.

Likewise, every region posted gains in July. 

The Northeast was up eight points, the Midwest gained three points to 34, the South rose five points to 32 and the West increased by 12 points to 44.