Home builder confidence rose for the first time in seven months in September, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), but the index remains far below the level at which market conditions are viewed positively.

The HMI gained two points to 18, rising from its record low of the previous two months. All three of the HMI¹s component indices gained in September, with those gauging current sales conditions up a point to 17 and traffic of prospective buyers each up a point 14. The sales expectations index, which looks forward six months, rose by six points, to 30, four points higher than its year-ago level.

The September HMI was up two points in the Midwest, to 15; up two points in the South, to 22; and up two points in the West, to 12. The Northeast was up six points to 22.

"Nearly half of the builders in our September survey indicated that they expect to see a positive impact from the tax credit in their market areas,² said NAHB Chief Economist David Seiders. ³Of those respondents, 20% said their market has already experienced some of this effect. Meanwhile, consumer confidence has risen and more households are saying that now is a good time to buy a home. All of these factors, along with the recent downward movements in mortgage rates, suggest that new-home sales will be stabilizing in the final quarter of the year.²

The HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "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.