The National Association of Home Builders confidence survey now stands at 40, although 50 is still the line between positive and negative. This is a vast improvement from where it was just one year ago: 14.

“Builders across the country are expressing a more positive,” notes NAHB Chief Economist David Crowe in a release. “However, against the improving demand for new homes, concerns are now rising about the lack of building lots in certain markets and the rising cost of building materials. Given the fragile nature of the housing and economic recovery, these are significant red flags.”

Builders also cite tight credit conditions for builders and buyers as another barrier to a stronger recovery. Still, the builders say they see improvements in current sales conditions, buyer traffic, and future sales expectations, with the last one rising above 50 into the positive territory. (Watch: US Housing Most Affordable in Years – Pro)

This sentiment appears to be widespread.

Confidence rose in every region of the country with the highest monthly gains in the West and Midwest where there are the largest volumes of new construction.

This confidence mirrors investor confidence in the stocks of the public builders, which are now at their highest levels since 2007. (Watch: Home Builders Are on Fire)

Even before this index was released, Goldman Sachs Group
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] Tuesday reiterated its optimism in the sector, citing, “a long list of positives” including the recent announcement from the Federal Reserve that it would purchase billions of dollars’ worth of agency mortgage backed securities, as well as rising home prices and low inventories. Goldman’s top picks are MDC Homes
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], Toll Bros.
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• Surging Homebuilders Have Further Upside: Analyst
• Builder Stocks With Big Potential: Pro
• Flood of Foreclosures 
• Cities With the Most Affordable Homes              

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