Builder confidence for new single-family homes is starting to rise. Confidence rose three points to 16 on the National Association of Home Builders/Wells Fargo Housing Market Index for October. The association reports that this is the first improvement registered by the HMI in five months, and the index has returned to levels that were last seen in June 2010.

“Builders are starting to see some flickers of interest among potential buyers, and are hopeful that this interest will translate to more sales in the coming months,” said Bob Jones, NAHB chairman and home builder from Bloomfield Hills, Mich. “However, because most builders still have no access to credit for building homes, there is a real concern that we will not be able to meet the pent-up demand when consumers are ready to get back in the market. This problem threatens to severely slow the housing and economic recovery."

David Crowe, chief economist for the NAHB, said the construction market for new homes is starting to clear some tough hurdles.

”The new-homes market is finally moving past the lull that occurred when the home buyer tax credits expired and economic growth stalled this summer,” he said. “While challenges such as competition from foreclosures, inaccurate appraisal values, and general consumer uncertainty about the economy and job market continue to be major factors, builders have seen a slight increase in consumers who are considering a home purchase. The toughest obstacles really come down to financing - the scarcity of construction credit for builders along with tougher mortgage requirements for consumers.”

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three of the HMI’s component indexes registered gains in October. The index gauging current sales conditions rose three points to 16, while the index gauging sales expectations in the next six months rose five points to 23 and the index gauging traffic of prospective buyers rose two points to 11.