A two-point increase in the NAHB's Housing Market Index brought the metric for builder confidence up to 55, one point less than the 2014 high set in January. Estimates of current sales conditions and expectations of future sales conditions were positive at 58 and 65, respectively; despite a three-point increase, the gauge of prospective buyer traffic remained in the negative at a 42 score. Index readings below 50 indicate negative builder sentiment.

Builder confidence in the market for new single-family homes rose two points to 55 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for August, released August 18. This third consecutive monthly gain brings the index to its highest level since January.

"As the employment picture brightens, builders are seeing a noticeable increase in the number of serious buyers entering the market," said NAHB chairman Kevin Kelly. "However, builders still face a number of challenges, including tight credit conditions for borrowers and shortages of finished lots and labor."

All three HMI components posted gains in August, and the indices gauging current sales conditions and expectations for future sales each rose two points to 58 and 65, respectively. The index gauging traffic of prospective buyers increased three points to 42.

"Each of the three components of the HMI registered consecutive gains for the past three months, which is a positive sign that builder confidence appears to be firming following an uneven spring," said NAHB chief economist David Crowe. "Factors contributing to this rise include sustained job growth, historically low mortgage rates and affordable home prices, which are helping to unleash pent-up demand."

Every region saw a gain in its three-month moving average HMI score in August. The Midwest posted a seven-point increase to 55 and the West registered a four-point gain to 56. The Northeast posted a two-point gain to 38 and the South was up one point to 52.

The HMI measures builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor," and asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores from each component are used to calculate a seasonally adjusted index, in which any number over 50 indicates that more builders view conditions as good than poor.