The number of improving housing markets expanded for a fourth consecutive month, according to the National Association of Home Builders/First American Improving Markets Index.

The number of improving housing markets rose 37% to 41 in December from 30 in November. The new list features 20 new markets, including several major markets such as Washington, San Jose, Calif. and Toledo, Ohio. Nine smaller markets dropped of the list mainly because of softer house prices.

The widening in both number and geographic diversity of markets is further evidence that housing markets are dependent on uniquely local factors.

The IMI identifies metropolitan areas that have shown at least six months of improvement in employment, housing prices and housing permits.

"The continued modest improvement we see across diverse housing markets combined with the recent improvement in unemployment are encouraging signs that the economy may finally be gaining some traction,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Company.

The U.S. added 120,000 jobs in November, pushing the unemployment rate down to 8.6% from 9.0%, the government reported last week.

NAHB Chairman Bob Nielsen noted that 21 states and Washington are represented on the improving markets list, up from14 states represented in November.

The results of the December list are in line with the latest government housing data and NAHB's builder surveys, which have shown modest signs of improvement in certain markets where employment is rising and distressed properties are not as numerous, said NAHB Chief Economist David Crowe.

“These gradual improvements are now becoming evident not just in small, energy-producing metros that have previously dominated the IMI, but also in several larger markets and areas with more diverse economies," Crowe added.

The top five markets on the IMI in terms of house price growth from their troughs are Williamsport, Pa., Bismarck, N.D., Danville, Va., Midland, Texas and Pittsburgh, Pa.

The nine markets that dropped off the IMI in December are Alexandria, La., Fairbanks, Alaska, Hinesville, Ga., Houma, La., Jonesboro, Ark., Lima, Ohio, Pine Bluff, Ark., Sumter, S.C., and Waco, Texas. All but two of the metros fell from the list because of softening house prices. Jonesboro and Waco dropped off because of declines in employment and single-family housing permits, respectively.

The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau.

Write to Justin T. Hilley.

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