The National Association of Home Builders said Wednesday its home builders' confidence index rose in September for the third month in a row, showing optimism for the battered residential real estate market where respondents see that rising sales.

The NAHB reported that its Housing Market Index, increased one point last month to 19, its highest level since May 2008.

The index, which fell to an all-time low of 8 in January, has increased steadily in 2009 as the housing market picked up in many parts of the country.

Index readings higher than 50 indicate positive sentiment about the market. The last time it was above 50 was in April 2006.

The latest NAHB index covered 533 residential developers nationwide as respondents in the survey conducted by Wells Fargo.

The gauge for current sales conditions climbed two points to 18 while the index for sales expectations over the next six month fell one point to 29 after rising for five months in a row.

Traffic by prospective buyers increased one point to 17.

Still, builders are clearly expecting sales to improve further. Some have rolled back incentives and even raised some of their home prices. Others are buying land again.

According to NAHB, the rebound in builder confidence is largely due to the tax credit for first time buyers that the government created last year. Low mortgage rates and rock-bottom home prices also helped boost confidence, the group says. But the tax credit is about to expire on November 30 and this cause concern when not renewed or extended.

According to NAHB, more than 1.5 million taxpayers are expected to claim the credit.