Home builders are cheering the latest Improving Markets Index, which suggests the sector may be finding its footing again.

While the triple-digit reading seen back in April remains elusive, Monday’s report from the National Association of Home Builders says that the list grew by four to 84 markets in July. The monthly index is based on a number of factors measured over six months, including employment growth, house-price appreciation and increases in single-family housing permits.

“The index appears to have stabilized following a dramatic slowdown over the past three months in which the index fell from 101 to 80,” writes Stephen East, a builder analyst with ISI Homebuilding Research, in a client note.

This recent batch of healing cities includes Phoenix and Tampa, which were among the areas hardest hit when the market crashed. Newcomers include smaller markets such as Prescott, Ariz., and Springfield, Mass. But a notable new addition was Houston, one of the nation’s largest housing markets.

“The geographic diversity and growing number of metros on the latest [index] help spotlight the improvements we have begun to see,” crows NAHB Chairman Barry Rutenberg, a builder from Gainesville, Fla.

Another NAHB report, this one with the Home Builders Institute, found that 40% of single-family home builders plan to work with laborers during the next year, indicating they expect to be building more homes. Nearly half of builders in the Midwest and West expect to hire, while 39% in the South do.

But the hard-hit sector continues limping along. Home builders complain that appraisals are being skewed by foreclosures. Credit standards also remain stringent, which is keeping plenty of would-be buyers out of the market. Indeed, seven markets fell off the improving markets list, including Rochester, N.Y., and Owensboro, Ky.

Still, industry watchers remain optimistic. “This is evidence that the housing recovery is slowly but surely taking root, one market at a time,” says NAHB Chief Economist David Crowe.

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