Builder confidence continues ascent to highest level in more than six years

Homebuilders' confidence rose for the fifth straight month in September, the highest level in more than six years, in another sign the housing market recovery is rooting. 

Optimism in the market for newly built, single-family homes grew to 40 this month, a three-point gain that brings the index to its best reading since June 2006, according to the National Association of Home Builders/Wells Fargo Housing Market Index on Tuesday. 

Still, the market is facing headwinds toward making a more robust recovery. 

“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," said David Crowe, NAHB's chief economist. 

"Given the fragile nature of the housing and economic recovery, these are significant red flags.” 

In addition, unnecessarily tight credit conditions are preventing many builders from putting crews back to work and creating jobs. 

All three index components posted gains in September. 

The current sales index increased four points to 42, the component gauging sales prospects in the next six months was up eight points to 51 and the component measuring traffic of prospective buyers edged up one point to 31.

Builder confidence also rose across every region 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.

“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, a home builder from Gainesville, Fla.