By Diana Olick, CNBC Correspondent NEW YORK ( CNBC) -- Sales of existing homes are recovering slowly, but a drop in supplies of those homes is pushing confidence among the new home builders to a six year high. There are just 2.1 million existing homes for sale, which is a 22% drop from a year ago, according to the National Association of Realtors (NAR). Much of this is due to a drop in foreclosed and distressed homes, as lenders try to modify troubled loans more aggressively. "In view of the tightening supply and other improving conditions, many potential buyers who were on the fence are now motivated to move forward with a purchase in order to take advantage of today's favorable prices and interest rates," wrote Berry Rutenberg, chairman of the National Association of Home Builders in a release Monday. That pushed home builder sentiment up 5 points in November on the NAHB's monthly survey. It now stands at 46, just 4 points shy of the line between positive and negative sentiment. Last year sentiment was around 19. The component of the index gauging current sales jumped 8 points, and sales expectations jumped 2 points, the only component now in the positive range. Again, much of that is due to a lower overall supply of homes on the market, as distressed homes fell to 24% of all sales, down from nearly 40% at the worst of the housing crash.
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First-time home buyers, who usually make up 40% of the market, are still down at just 31%. So add up first timers and owner-occupants using a mortgage, and that is where you get the jump in demand for new construction. Home builders are clearly seeing this, with many of the big public companies seeing huge jumps in net new orders. --Written by Diana Olick at CNBC