The National Association of Home Builders/Wells Fargo Housing Market Index rose six points in July to 57, making three months of gains and its highest level since January 2006. The seasonally adjusted index consists of three components: current sales conditions, sales expectations and traffic of perspective buyers. Any score over 50 means more builders view conditions as good versus those that consider them poor.

The current sales conditions index is at 60, up five points, and its highest point since early 2006. Even better news is that the component measuring sales expectations over the next six months gained seven points and is now at 67. The index measuring traffic of perspective buyers is up five points to 45. The latter two components are at their strongest readings since late 2005, NAHB said.

NAHB chairman Rick Judson said the index shows improvement in builder market confidence across every region of the nation. But he warned “this positive momentum could be disrupted by threats on the policy side, particularly with regard to the mortgage interest deduction and federal support for the housing finance system.”

By region, the Northeast rose four points to 40, the Midwest is up eight points to 54, the South gained five points to 50 and the West is up three points to 51.

NAHB chief economist David Crowe said, “Builders are seeing more motivated buyers coming through their doors as the inventory of existing homes for sale continues to tighten. Meanwhile as the infrastructure that supplies home building returns, some previously skyrocketing building material costs have begun to soften.”

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