Builder confidence ticked up by one point to 19 in September, the third increase in as many months and the highest since May of ‘08 according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

At the peak of the housing market several years ago, the overall HMI stood at 72.

September's HMI improvement largely matched up with news reports of increased buyer traffic, which also rose one point to 17, and the index component gauging current sales conditions, which jumped two points to 18 in September. “Today’s report indicates that builders are starting to see some glimmers of light at the end of the tunnel in terms of improving sales activity,” said NAHB Chief Economist David Crowe.

But it might be a while before that light grows brighter. Builders’ expectations of sales in the next six months slipped backwards in September by one point to 29.

There are valid worries that the recovery is “fragile,” Crowe said. The recent increases in sales have been influenced by the $8,000 federal tax credit that expires in November. Builders are still having problems getting construction loans. Appraisals are falling short of sales agreements, resulting in the derailment of an estimated one-quarter of new home sales.

"These concerns need to be addressed if we are to embark on a sustained housing recovery that will help bolster economic growth,” Crowe said.

Joe Robson, chairman of the NAHB and a home builder from Tulsa, Okla., declared that extending the tax credit is critical for builders. “Congress needs to act now to keep the credit from expiring just as its intended effect on buyer demand is starting to materialize," he said.

Teresa Burney is a senior editor at BUILDER and BIG BUILDER magazines.