Sept home builder sentiment as measured by the NAHB rose to 40 from 37 and is better than expectations of 38. It’s the best since June ’06 and is quietly approaching the magic 50 level of breakeven between expansion and contraction. It got as high as 72 in June ’05 and low as 8 in Jan ’09. The Present component rose 4 pts to 42 and the Future outlook was up by 8 pts to 51. Prospective Buyers Traffic was more subdued, rising just 1 pt to 31. The NAHB cheered the improvement but also highlighted the hindrance of still “tight credit conditions” which are “preventing many builders from putting crews back to work…and discouraging consumers from pursuing a new home purchase.” Also, higher cost of inflation is being cited as an issue for builders as “the rising cost of building materials” in addition to “lack of building lots in certain markets.” “Given the fragile nature of the housing and economic recovery, these are significant red flags.” Housing continues to see improvement, with the Fed again trying to give it a further kick in the pants, but the pace and sustainability will still be uneven. August Housing Starts and Existing Home Sales are released tomorrow.