Traders crowd the post that handles Morgan Stanley on the floor of the New York Stock Exchange near the close of trading, Wednesday Sept. 17, 2008. The Dow Jones industrial average dropped about 450 points, and investors seeking the safety of hard assets and government debt sent gold, oil and short-term Treasury's soaring.  (AP Photo/Richard Drew)
Richard Drew Traders crowd the post that handles Morgan Stanley on the floor of the New York Stock Exchange near the close of trading, Wednesday Sept. 17, 2008. The Dow Jones industrial average dropped about 450 points, and investors seeking the safety of hard assets and government debt sent gold, oil and short-term Treasury's soaring. (AP Photo/Richard Drew)

Yes, rates are up, and higher rates make housing less affordable. Couple that with housing price increases in many markets, and affordability is taking the old one, two.

Nonetheless, just last week the NAHB/Wells Fargo Housing Market Index jumped 6 points to 57, the highest reading since January 2006. On top of that, the component of the Index that gauges builders' sales expectations for the next 6 months gained 7 points to 67, the strongest reading since...2005!

Then this week saw the release of existing home sales, which--to the dismay of some of the analysts--fell about 1% to 5.08 million. Somehow that 1% decline trumped (for the analysts) the fact that at 5.08 million existing home sales were up about 15% year-over-year and stood at the highest level since 2007 (save for the short period distorted by the home buyer tax credit).

And that's bad news?

I don't think so. Nor do builders.

Image credit: Flickr.com user thetaxhaven.