The National Association of Home Builders (NAHB)/Wells Fargo housing market index rose by three points from a downwardly revised 56 in July to 59 in August. Last month’s reading had been the highest for the index since January 2006. An index reading below 50 indicates that more builders view sales conditions as poor than view them as good. The reading was higher than an expected reading of 57.

Sub-indexes that measure current sales conditions and sales expectations came in at 62 in July, its highest level since early 2006. The reading on sales expectations rose one point to 68, and the sub-index that estimates prospective buyer traffic remained unchanged at 45. The reading for sales expectations is the highest since March 2006.

On Tuesday, the NAHB reported that housing affordability has slipped across the United States. In the second quarter of the year, 63.3% of new and existing homes sold were affordable for families earning the U.S. median income of $64,400, down from 73.7% in the first quarter and the first time the index has fallen below 70% since late 2008.

Rising home prices and mortgage loan rates are beginning to take a toll on home sales. Share prices for publicly traded home builders peaked in May, with PulteGroup Inc. (NYSE: PHM) up nearly 90%, Beazer USA Homes Inc. (NYSE: BZH) up about 68%, D.R. Horton Inc. (NYSE: DHI) up about 50%, Toll Brothers Inc. (NYSE: TOL) up 21% and the SPDR S&P Homebuilders ETF (NYSEMKT: XHB) up nearly 43%. Since mid-May, all are down between 13% and 40%.

Since May the 30-year fixed mortgage rate is up more than a full point, and even though rates remain at 4.5% or lower, buyers are getting more cautious. In most areas, home prices remain well below their peaks, even though prices are up. Buyers are probably smart enough to know that sub-4% mortgage rates will not return any time soon, so they likely are being more cautious due to uncertainty about the U.S. economy.

Today’s data from the NAHB, upbeat though it is, could be wishful thinking.

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