Builders' confidence in the market for new single-family homes increased as the National Association of Home Builders' housing market index — a monthly gauge of builder sentiment — rose to 37 in August from an unrevised 35 in July.

This was the fourth straight increase in the index.

Thomson Reuters' poll of economists predicted the index would be 35.

Although current sales, expected sales and traffic of prospective buyers reached five-year highs, the levels remain extremely low, according to NAHB Chairman Barry Rutenberg. "While there is still much room for improvement, we have come a long way from the depths of the recession and the outlook appears to be brightening."

Four months of improvement offers "further evidence of the gradual strengthening" in "many" areas, said NAHB Chief Economist David Crowe. "However, we are still at a very fragile stage of this process and builders continue to express frustration regarding the inventory of distressed properties, inaccurate appraisal values, and the difficulty of accessing credit for both building and buying homes."

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as either "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

All component indexes increased in August. The current single-family home sales index jumped to 39 from 36, the sales expectations index for the next six months grew to 44 from 43, and the traffic of prospective buyers index rose to 31 from 28.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.