The National Association of Homebuilders (NAHB)/Wells Fargo housing market index rose 1 point in October, to 41, the highest index reading since June 2006. An index reading below 50 indicates that more builders view sales conditions as poor than view them as good. The reading was inline with expectations.

The October gain led the NAHB’s chairman to note:

Many builders are reporting increases in the number of serious buyers visiting their sales offices, and the overall confidence measure is much higher than it was at this time last year. The concern is that, even though demand for new homes is rising, overly tight credit conditions are still constraining new building and new purchases at a time when that kind of economic activity and the job growth it generates are greatly needed.

The slight gain in builder confidence this month is an indication that, while still moving forward, the speed at which the housing recovery is proceeding is being moderated by the various constraints such as tight credit, difficult appraisals and more recently, the limited inventory of buildable lots in certain markets

It’s worth mentioning that the NAHB is no longer noting a problem with inventories of distressed properties. The issue of limited inventory of buildable lots arose last month for the first time in a long while.

The reading for current sales conditions outlook for the next six months remained unchanged at 42 in October, and the index for sales prospects in the next six months remained at 51. The traffic rose 5 points in October to 35.

KB Home (NYSE: KBH) is down fractionally at $15.20 in a 52-week range of $6.17 to $16.33.

Lennar Corp. (NYSE: LEN) is down about 1.5% at $36.48 in a 52-week range of $14.36 to $38.27.

The iShares Dow Jones US Home Construction ETF (NYSEMKT: ITB) is down 0.5% at $19.87 in a 52-week range of $9.39 to $20.79.

Paul Ausick

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