An index gauging the confidence of home builders rose for the third month in a row in September to its highest level in more than a year, but far more builders still see conditions as poor than good.

The National Association of Home Builders/Wells Fargo Housing Market Index, which measures builder confidence in the market for newly built, single-family homes, rose one point from August to September, to 19 — its highest level since May of 2008.

An index gauging the confidence of homebuilders rose for the third month in a row in September to its highest level in more than a year, but far more builders still see conditions as poor than good.

The National Association of Home Builders/Wells Fargo Housing Market Index, which measures builder confidence in the market for newly built, single-family homes, rose one point from August to September, to 19 — its highest level since May 2008.

Two of the index’s three components were up in September — an index gauging current sales and an index gauging traffic of prospective buyers. But an index gauging sales expectations for the next six months declined one point, to 29.

A score under 50 indicates that more builders view sales conditions as poor than good.

The decline in the index component gauging sales expectations for the next six months is a sign that builders are aware that "this is a very fragile recovery period and several major hurdles remain that could stifle the positive momentum," NAHB Chief Economist David Crowe said in a statement.

Those hurdles include the impending expiration of the $8,000 first-time homebuyer tax credit, a lack of credit for housing production loans, and continuing problems with low appraisals that are sinking one-quarter of all new-home sales, Crowe said.

In a report released today, economists with the University of California, Los Angeles, Anderson Forecast said they expect single-family housing starts will bottom out this year at 452,000, down from 1.7 million in 2005.  The forecast projects that single-family housing starts will rebound to 666,000 next year and 1.02 million in 2011.

The current building rate is 1 million units lower than the historic trend line, laying the foundation for "the next housing mania" if future demand exceeds supply, warned Edward Leamer, director of the UCLA Anderson Forecast (see story).

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