Confidence is NAHB’s Valentine for Construction

Builder confidence rose for the fifth consecutive month in February, further signs of a housing recovery.

Home builder confidence in the single-family home market rose for the the fifth consecutive month in February, according to the latest NAHB/Wells Fargo Housing Market Index (HMI), reaching its highest level since 2008.

Barry Rutenberg, the NAHB chairman and a home builder from Gainesville, Fla., said the latest HMI suggests a positive, sustainable future for housing.

“Builder confidence has doubled since September as measured by the HMI,” Rutenberg said. “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.”

Derived from a monthly survey that NAHB has been conducting for more than 20 years, HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” Scores from the survey are used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The HMI is currently at 29, which, as NAHB Chief Economist David Crowe pointed out, still suggests fragility in the market.

“This is the longest period of sustained improvement we have seen in the HMI since 2007, which is encouraging,” Crowe said. “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.”

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.

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