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The National Association of Home Builders (NAHB)/Wells Fargo housing market index (HMI) for December rose to 74, up five points from a downwardly revised June reading of 69. Economists polled by Bloomberg were expecting an index reading of 70.

An index reading above 50 indicates that more builders view sales conditions as good than view them as poor. NAHB Chairman Granger MacDonald said that conditions in the housing market are improving “because of new policies aimed at providing regulatory relief to the business community.”

The current sales conditions subindex for December from 77 to 81 and the subindex that estimates prospective buyer traffic jumped eight points, from 50 to 58. The subindex measuring sales expectations for the next six months rose by three points from 76 to 79.

The NAHB’s chief economist said:

The HMI measure of home buyer traffic rose eight points, showing that demand for housing is on the rise. With low unemployment rates, favorable demographics and a tight supply of existing home inventory, we can expect continued upward movement of the single-family construction sector next year.

In the NAHB’s regions, the three-month moving average indexes rose in all four regions. In the Northeast, the index rose a point to 54. The Midwest saw a six-point increase to 69, while the index rose three points to 72 in the South. And the West posted a gain of two points to 79.

The NAHB/Wells Fargo December housing market index posted its second-highest total since July 2005. Prior to mid-2013 the index had not risen to 50 since mid-2006.