Builders' confidence in the market for new single-family homes increased for the sixth straight month as the National Association of Home Builders' housing market index - a monthly gauge of builder sentiment - rose to 41 in October from 40 in August.

Thomson Reuters' poll of economists predicted the index would be 41.

Builders have seen an increase in "serious buyers" an overall confidence "is much higher" than last year, according to NAHB Chairman Barry Rutenberg. "The concern is that, even though demand for new homes is rising, overly tight credit conditions are still constraining new building and new purchases at a time when that kind of economic activity and the job growth it generates are greatly needed."

Downplaying the increase, NAHB Chief Economist David Crowe said that while it shows the housing recovery is "still moving forward," but the pace "is being moderated by the various constraints such as tight credit, difficult appraisals and more recently, the limited inventory of buildable lots in certain markets." Crowe said, "These are the complicating factors that make it difficult for builder confidence to reach and surpass the 50-point mark, at which an equal number of builders view sales conditions as good versus poor."

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.

One component indexes increased in October while two were flat. The current single-family home sales index held at 42, the sales expectations index for the next six months remained 51, and the traffic of prospective buyers index rose to 35 from 30, its highest level since April 2006.

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