The National Association of Home Builders/Wells Fargo Housing Market Index remained mired in pessimism in August, holding firm at 16 from July and matching the historic low reached earlier this year.

Still, the NAHB said the sales expectations index, a component of the HMI, rose two points to 25 from July to August, an increase it attributed to the passage of housing stimulus legislation. There also was a one-point rise in the index gauging current sales conditions, to 16. The component gauging traffic of prospective buyers remained unchanged at 12.

"While our overall measure of builder confidence remains at a record low at this time, it is a good sign that two out of three of the HMI's component indexes rose in August, and this may be an indication that we are nearing the bottom of the long downswing in new-home sales," said NAHB chief economist David Seiders. "Our current forecast shows stabilization of sales during the second half of this year, followed by solid recovery in 2009 and beyond."

Analysts took a decidedly more pessimistic view. "This weakness reflects our belief that conditions remain bleak and that any improvement is unlikely to materialize until the second half of 2009 at the earliest," wrote David Goldberg at UBS in a research note. "In the meantime, we expect rising foreclosures and declining mortgage liquidity to continue to negatively impact buyers, leading to further home price erosion. In turn, builder sentiment will likely remain pessimistic until these pressures begin to ease."

Carl Reichardt of Wachovia Securities was similarly dour. "Despite the recent passing of the much anticipated housing stimulus bill, builder sentiment did not change significantly in August and remains at depressed levels," he wrote. "With no signs of improved mortgage liquidity, lackluster demand, and uncertain economic conditions, we are not surprised by this. Given our belief that the elimination of down payment assistance (DPA) on 10/01/08 will not be offset by the new first-time homebuyer $7,500 tax credit, we believe the net influence of the housing package will be limited and therefore do not expect to see a meaningful up tick in the HMI near-term."

Regionally, the Northeast was up two points to 16 and the Midwest up four points to 14. The South remained unchanged at 20, and the West was down three points to 11.

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.