Builder confidence in the market for newly built, single-family homes edged higher for a third consecutive month in September, reaching a level of 19, the highest since May of 2008, according to the latest NAHB/Wells Fargo Housing Market Index (HMI).

"Builders are seeing some improvement in buyer demand as a result of the first-time home buyer tax credit, and low mortgage rates and strong housing affordability have also helped to revive some optimism," noted NAHB Chairman Joe Robson.

"However, the window is now basically closed for being able to start a new home that can be completed in time for buyers to take advantage of the tax credit before it expires at the end of November, and builders are concerned about what will keep the market moving once the credit is gone,” Robson said. “Congress needs to act now to keep the credit from expiring just as its intended effect on buyer demand is starting to materialize."

"The report for this month 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.

“However, the fact that the HMI component gauging sales expectations for the next six months slipped backward this month is a sign of their awareness that this is a very fragile recovery period and several major hurdles remain that could stifle the positive momentum,” Crowe said. “Those hurdles include the impending expiration of the $8,000 tax credit as well as the critical lack of credit for housing production loans and continuing problems with low appraisals that are sinking one quarter of all 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."

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the HMI gauges builder perceptions of current single-family home sales, sales expectations for the next six months and the traffic of prospective buyers. Any number over 50 indicates that more builders view sales conditions as good than poor.

Two out of three of the HMI's component indexes recorded gains in September. The index gauging current sales conditions rose two points, to 18, and the index gauging traffic of prospective buyers rose one point, to 17. Sales expectations for the next six months, meanwhile, declined one point, to 29.

All four regions posted gains in their HMI readings for September. The biggest improvement was registered in the Midwest, where a three-point gain lifted its HMI to 19, the highest level since July of 2007. Two-point gains brought the index to 24 and 19 in the Northeast and South, respectively, and the West reached 18 after gaining one point.