Builder confidence in the market for newly built, single-family homes rose five points in April to the highest level since October 2008, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This gain was the largest one-month increase recorded since May of 2003, and brings the HMI out of single-digit territory for the first time in six months – to 14. Every component of the HMI reflected the boost, with the biggest gain recorded for sales expectations in the next six months.

“This is a very encouraging sign that we are at or near the bottom of the current housing depression,” says NAHB chief economist David Crowe. “With the prime home buying season now underway, builders report that more buyers are responding to the pull of much-improved affordability measures, including low home prices, extremely favorable mortgage rates and the introduction of the $8,000 first-time home buyer tax credit.”

Crowe cautioned, however, that a key issue that still must be addressed is the ongoing lockdown on builder acquisition, development and construction (AD&C) financing. “Restoring health to our nation’s economy will require a substantial housing recovery, and that recovery is contingent on breaking the logjam in AD&C lending that presents an ever-increasing obstacle for home builders,” he said.

The NAHB/Wells Fargo HMI is calculated using a monthly survey that NAHB conducts. It is designed to gauge builder perceptions of current single-family home sales and sales expectations in 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 for 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.

In other news from the housing market, the U.S. Commerce Department reported last week that single-family housing starts for the month of March remained unchanged, though starts in the multifamily sector were down, leading to a total decrease of 10.8 percent in housing starts.

“While improving interest among potential home buyers has builders more optimistic these days, we don’t want to ramp up production until sales of new homes pick up,” says NAHB chairman Joe Robson. “A cautious attitude about new building is definitely what’s called for here, and that’s what most builders have wisely adopted for the time being.”

“Today’s numbers are right on target with NAHB’s forecast, which anticipates that housing starts will bottom out in the second quarter, after new-home sales have stabilized,” adds Crowe.

While total housing starts declined 10.8 percent to a seasonally adjusted annual rate of 510,000 units in March, single-family housing starts remained exactly on par with the previous month, at a 358,000-unit rate. Multifamily starts declined 29 percent in the month to a 152,000-unit rate, erasing a large portion of the gain posted by that sector in the previous month.

Housing starts were down in three out of four regions in March. The only region posting a gain was the Midwest, which was up nearly 16 percent. Meanwhile, the Northeast posted a 25.4 percent decline, the South a 16.8 percent decline and the West a 26.3 percent decline.

Building permits also fell in March. Total permit issuance declined 9 percent to a seasonally adjusted annual rate of 513,000 units, with single-family permits down 7.4 percent to 361,000 units and multifamily permits down 12.6 percent to 152,000 units.

Permit issuance declined across every region except the West in March. While that region posted no change from February, the Northeast posted a 24.3 percent decline, the Midwest a 2.3 percent decline and the South a 10.3 percent decline.