Home Builder Confidence Marks Highest Level Since 2007

The results from the monthly NationalrnAssociation of Home Builders NAHB)/Wells Fargo Housing Market Index (HMI) rosernin February for the fifth consecutive month, hitting the highest level for thernindex in more than four years.  The HMI,rnwhich gauges home builder confidence, rose from 25 in January to 29 this month.</p

Each month NAHB conducts a survey of itsrnmembers in which it asks them their perceptions of the market for newrnhomes.  They are asked to describe bothrncurrent sales and their expectations for sales over the next six months as “good,”rn”fair,” or “poor.”  They are also askedrnto rate the traffic of prospective buyers as”high to very high,” “average,” or “lowrnto very low.”  Answers to the questions arernused to construct a composite index – the HPI – and three componentrnindices.  A number above 50 on any index indicatesrnthat more builders view conditions as good rather than poor.  </p

Each of the three components improvedrnfor the fifth consecutive month as well. rnThe index measuring traffic of prospective buyers rose from 21 to 22;rnthe component measuring expectations for the next six months increased from 29rnto 34, and builders’ perceptions of current sales rose from 25 to 40.</p

NAHB Chief Economist David Crowe</bnoted that five months is the longest period of sustained improvement for thernHMI since 2007 and called it encouraging.  "However, it is important to remember that thernHMI is still very low, and several factors continue to constrain the market,"rnhe said.   Foreclosures are still competing with new homernsales, and many builders are seeing appraisals come in at less than the cost ofrnconstruction. Additionally, prospective home buyers are finding it difficult tornqualify for a mortgage."</p