Current and prospective sales conditions for the next six months are better than they have been in more than five years, Barry Rutenberg, chairman of the National Association of Home Builders, said.

“While there is still much room for improvement, we have come a long way from the depths of the recession and the outlook appears to be brightening,” Rutenberg said.

The comments arrive on the tail of the just-released National Association of Home Builders/Wells Fargo Housing Market Index. The index revealed that builder confidence in the market for newly built, single-family homes improved for a fourth straight month in August with a two-point gain to 37.

The gain builds on a six-point increase in July, the index’s steepest one-month increase in over a decade, and takes it to its highest level since February 2007.

Analysts at Barclays Capital expected a two-point decline to 35, while the market consensus expected no change.

“Housing has clearly been the bright spot in the recovery recently, with starts, sales, and prices all up significantly from their year-ago levels,” Barclays said. 

July housing starts will be released Thursday. Analysts at Barclays are looking for the number to come in at 758,000, which is well above the second-quarter average of 739,000 and the first-quarter average of 715,000.

And builder confidence in older homeowners is accelerating as buyers slowly return to the 55 and older housing market caused by an improvement home prices. Builder confidence in the single-family housing market for mortgage borrowers aged 55 and older doubled in the second quarter from a year earlier. It’s helping to unlock some of the pent-up demand from 55-plus consumers who have been sitting on the sidelines waiting to sell their homes at a reasonable price.

However, NAHB Chief Economist David Crowe warned that “we are still at a very fragile stage of this process and builders continue to express frustration regarding the inventory of distressed properties, inaccurate appraisal values, and the difficulty of accessing credit for both building and buying homes.” 

Each index component posted gains in August. The components gauging current sales conditions and traffic of prospective buyers each rose three points, to 39 and 31, respectively, while the component gauging sales expectations in the next six months inched up one point to 44. All were at their highest levels in more than five years.

Regionally, builder confidence rose nine points to 42 in the Midwest and two points to 35 in the South, but declined nine points to 25 in the Northeast and three points to 40 in the West in August.

Housing markets improved in 80 metropolitan statistical areas over the last six months, according to the NAHB and First American (FAF).

"The list of improving housing markets in August includes metros across every region of the country, all of which have distinctly different characteristics in terms of their economic and employment bases as well as other factors," Rutenberg said.

"One thing that most markets have in common, however, is the tight lending environment for both builders and buyers that continues to drag on their positive momentum,” he added.