The measure of improving housing markets had been declining for several months, but a change in the method to compile the index's data may partially explain this month's rise.

"The dramatic increase in markets qualifying for the [improving market index] in September was partly due to a recent improvement in the way that Freddie Mac measures home prices, which resulted in stronger gains than previously reported," says NAHB chief economist David Crowe. "Even so, the broadened list of metros on the [index] continues to demonstrate the slow but steady gains that individual housing markets are making to bolster the national outlook."

NAHB Chairman Rick Judson says slightly more than 80 percent of the 361 metros tracked by the index have shown consistent growth in three key measures for at least six consecutive months: housing permits, employment, and home prices.

"While there is still plenty of room for growth, this is an excellent indication of how the housing recovery has begun to take hold across more geographic areas,” Judson says.

Among some of the metros added to the list in September were Macon, Ga.; St. Cloud, Minn.; Brownsville, Texas; Spokane, Wash.; and Milwaukee. All 50 states have at least one metro on the list.