Builders are slightly more confident in the market for new single-family homes this month than they were in June, but they still are a long way from positive, the National Association of Home Builders reported Thursday afternoon.

The NAHB/Wells Fargo Housing Market Index (HMI) crept up two points to 17 in July as builders saw an improvement in current sales conditions but continued to express concerns about the future. Still, 17 is the highest reading in the index since last September.

"Although today¹s HMI is positive news that helps confirm the market is bouncing around a bottom, the gain was entirely contained in the component gauging current sales conditions, while the component gauging sales expectations for the next six months remained virtually flat for a fourth consecutive month," said NAHB chief economist David Crowe. "Builders recognize the recovery is going to be a slow one and that we are facing a number of substantial negative forces."

The index gauging current sales conditions rose three points to 17, while the index gauging traffic of prospective buyers rose a single point to 14. The index gauging sales expectations for the next six months remained flat at 26. Any reading below 50 indicates negativity; above 50 is considered positive.

Regionally, the HMI in the South was up 5 points to 20; the Northeast fell 3 points to 16; the Midwest and West were each unchanged, at 14 and 15, respectively.

"Builders are seeing slightly better sales conditions this month as consumers take advantage of the first-time buyer tax credit, low interest rates and attractive home prices, but many remain quite concerned about the road that lies ahead," said NAHB chairman Joe Robson, a home builder from Tulsa, Okla. "A true recovery in the housing market and overall economy cannot take place until the continuing foreclosure crisis is abated and a decent flow of credit is restored to housing production. Meanwhile, the stalled jobs market is a major concern to builders and potential home buyers alike."

Crowe said a quarter of all new-home sales are falling through due to appraisal issues that are tied to the use of distressed and foreclosed properties as comps. "This is a tremendous obstacle for a housing market that is struggling to get back on its feet, as is the lack of available credit for acquisition, development and construction financing."