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Home builder sentiment index jumps to 53 in July, crossing into positive territory

The nation's home builders are clearly feeling better about the housing recovery. A monthly sentiment index from the National Association of Home Builders jumped 4 points in July to 53, finally crossing into positive territory; 50 is the line between positive and negative sentiment.

"This is the first time that builder confidence has been above 50 since January and an important sign that it is strengthening as pent-up demand brings more buyers into the marketplace," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.

The number is beyond the Street's expectations of a 1-point gain and comes amid concern that the housing recovery has lost considerable steam. Home prices are still rising well beyond income gains, and even Fed Chair Janet Yellen, in testimony Tuesday to Congress, called the recovery "disappointing." Mortgage rates have not moved, but demand for home loans continues to fall.

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Employment, however, is improving, and low levels of existing homes for sale is creating more demand for new construction.

A worker guides a section of a new home into place at the Toll Brothers Baker Ranch community development in Lake Forest, California, Feb. 11, 2014.
Patrick T. Fallon | Bloomberg | Getty Images
A worker guides a section of a new home into place at the Toll Brothers Baker Ranch community development in Lake Forest, California, Feb. 11, 2014.

"An improving job market goes hand in hand with a rise in builder confidence," said NAHB Chief Economist David Crowe. "As employment increases and those with jobs feel more secure about their own economic situation, they are more likely to feel comfortable about buying a home."

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All three components of the monthly index posted gains in July. Current sales conditions increased 4 points to 57, expectations for future sales rose 6 points to 64 and buyer traffic increased 3 points to 39. Buyer traffic remains the weakest, and another monthly survey from Credit Suisse claimed just the opposite of the NAHB survey, featuring the headline: "Increasing number of buyers fatigued by home price gains as traffic falls again."

Regionally, on a three-month moving average, home builder sentiment rose 1 point in the Northeast, 2 in the Midwest, jumped 5 in the West and 2 points in the South, from June. Confidence is still 3 points below where it was in July 2013.

Read MoreHousing still too expensive despite positive signs

—By CNBC's Diana Olick

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.