The steady rise of homebuilder confidence is starting to hit the
national press as the public is eager for any positive economic news. The latest nudge in homebuilder confidence now marks the fifth consecutive month of increases.
The National Association of Home Builders(NAHB)/Wells Fargo Housing Market Index (HMI) shows that homebuilder confidence in the market for new single-family homes increased from 25 to 29. This marks the highest level the index has reached in more than four years.
“Builder confidence has doubled since September as measured by the HMI,” said NAHB Chairman Barry Rutenberg, a homebuilder from Gainesville, Fla. “Given the recent improvements in new home starts and the increasing number of markets included in the NAHB/First American Improving Markets Index, this consistency suggests that the housing market is moving toward more sustainable growth.”
Keep in mind, the 29 score on the HMI scale is still a relatively low score. Rutenberg cautioned that the housing sector remains very fragile with significant differences between individual markets, and said policymakers must guard against actions that could impede or even reverse the gains of recent months.
“This is the longest period of sustained improvement we have seen in the HMI since 2007, which is encouraging,” said David Crowe, chief economist for NAHB. “However, it is important to remember that the HMI is still very low, and several factors continue to constrain the market. Foreclosures are still competing with new home sales, and many builders are seeing appraisals come in at less than the cost of construction. Additionally, prospective home buyers are finding it difficult to qualify for a mortgage.”
Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
Each of the HMI’s three components also improved for a fifth consecutive month in February. The component measuring traffic of prospective buyers rose from 21 to 22, and the component measuring sales expectations for the next six months increased from 29 to 34. The component measuring current sales rose from 25 to 30.