Builders’ confidence in the market for new single-family homes improved but remained quite low as the National Association of Home Builders' housing market index — a monthly gauge of builder sentiment — gained to 29 in February from 25 in January.
Thomson Reuters' poll of economists predicted the index would be 26.
“Builder confidence has doubled since September as measured by the HMI,” said association chairman Barry Rutenberg. “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.”
The sector, he warned, “remains very fragile,” and is susceptible to actions that could reverse recent gains.
“This is the longest period of sustained improvement we have seen in the HMI since 2007, which is encouraging,” said NAHB chief economist David Crowe. “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 the NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either "good," "fair," or "poor."
The survey also asks builders to rate traffic of prospective buyers as either "high to very high," "average," or "low to very low."
Scores for each component are then used to calculate a seasonally adjusted index in which any number over 50 indicates that more builders view sales conditions as good than poor.
All three component indexes increased in February. The current single-family home sales index climbed to 30 from 25, and the sales expectations index for the next six months rose to 34 from 29. The traffic of prospective buyers index increased to 22 from 21.