The National Association of Home Builders (NAHB)/Wells Fargo housing market index for September rose four points to 59 from a reading of 55 in August. The reading was higher than a consensus forecast of 56 from a Bloomberg survey and was the highest reading since November 2005. September is the fourth consecutive month to post a yearly high index reading.

An index reading above 50 indicates that more builders view sales conditions as good than view them as poor.

The current sales conditions sub-index rose five points in September to 63, and the sales expectations sub-index rose to 67, up two points month-over-month. The sub-index that estimates prospective buyer traffic rose five points to 47.

The NAHB’s chief economist noted:

While a firming job market is helping to unleash pent-up demand for new homes and contributing to a gradual, upward trend in builder confidence, we are still not seeing much activity from first-time home buyers. Other factors impeding the pace of the housing recovery include persistently tight credit conditions for consumers and rising costs for materials, lots and labor.

The three-month moving average index rose in all four regions of the country. In the South the index gained four points to post a 56 index score, and the Northeast region rose three points to 41. In the Midwest confidence rose five points to 59, and in the West the index rose two points to 58.

We noted earlier Wednesday morning that mortgage applications rose last week and mortgage loan rates also increased. Homebuilder Lennar Corp. (NYSE: LEN) beat earnings estimates Wednesday morning as well, and its stock was up more than 6% in the first hour of trading.

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