Despite fluctuating mortgage rates, rising materials prices and an up-and-down economy, area home builders maintained a generally bullish outlook for the metro housing market as the August Housing Market Index reading for single-family detached builders came in at 61, up one point from July’s reading and well above the 50 neutral reading.

This month’s one-point rise followed an identical one-point rise the previous month and is also up one point from August 2003. This marks one of the most stable periods in builder confidence during the last 15 months. The index had not seen a similar three-month period of stability since July through September of 2003 when the index hovered between 58 and 60.

During that period, however, the individual components of the index, current conditions, expected conditions and traffic, were showing some volatility but were ultimately “averaging out” in the overall index. Currently, though, the individual index components also are pointing to stability.

The current conditions component of the HMI, the most heavily weighted of the three components, was 66 in August, up just one point from July. As with the main index, this reading was also up just one point the month before. Current conditions reached its 2004 high in April at 81. At the time area new-home sales were running nearly 16 percent ahead of last year’s levels.

The expected conditions component, measuring conditions for the next six months, was up two points to 68. That following a three-point decline the previous month. The August reading of 68 is one point above the year ago reading. Interestingly, interest rates were higher last August than today, averaging 6.26 percent compared to the 5.87-percent average in August 2004, according to data from Freddie Mac. Expected conditions topped out this year first in January at 84 and then matched that high again in March.

The August traffic reading came in at 46, down one point this month, following a three-point rise in July. Last summer, June through August, traffic readings came in at 48 each month, and then slowed in September and throughout the winter. So far in 2004 traffic readings topped in April with a 64 reading.

In the face of widely expected incremental increases in interest rates, still rising materials prices and the specter of a housing bubble endlessly being bantered about by the media, builders remain firmly bullish. When looking at permit numbers, up more than 2 percent from last year’s record high, and new-home sales data, up 10 percent year to date, it’s easy to see why builders remain confident in the market.