The spring selling season may be over, but according to home builders things are just getting warmed up. Builder confidence shot up in July, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The index was up six points for a monthly reading of 35—the largest monthly gain in nearly a decade and the highest reading the HMI has seen since March 2007.

The index, on which any reading under 50 indicates a majority of builders still see conditions as "poor" rather than "good," saw improvement in all three categories. The components measuring current sales conditions and traffic of prospective buyers each gained six points, for readings of 37 and 29, respectively. The component gauging expected sales for the next six months shot up 11 point to 44.

"In an unexpected twist, the housing market is starting to look like one of the bright spots in the U.S. economy," wrote IHS economists Nigel Gault and Paul Edelstein, in a note anticipating the release. "Housing starts are expected to have advanced in June after a decline in May, while positive signs from mortgage application data and a boost in initial contract signings point to stronger home resales last month." Starts and permits numbers and existing-home sales for June are scheduled for released later this week.

However, David Goldberg, an economist at UBS specializing in real estate, forecast a slowdown in a statement released today. "Although recent trends in housing have been impressive, we believe they will moderate moving forward," he wrote, pointing to macro weakness that "has yet to be reflected in demand," market illiquidity among entry-level buyers, and comps, which he anticipates will get more difficult.

See the NAHB’s full release on July’s Housing Market Index reading.

Claire Easley is a senior editor at Builder.

Learn more about markets featured in this article: Greenville, SC.