Builder confidence hits four-year high in February

The NAHB/Wells Fargo Housing Market Index showed increased confidence for the new single-family home market for the fifth consecutive month, rising to its highest point since 2007. Shorter-term growth has been significant as well, with builder confidence doubling since September, according to NAHB Chairman Barry Rutenberg.

The HMI measures confidence in three separate areas, aggregating them to arrive at an overall number. Those include: traffic of prospective buyers; sales expectations for the next six months; and current sales. Scores are derived from responses to a monthly survey conducted by NAHB. On the whole, the index rose from 25 to 29 during the month of February. A score of 50 or more indicates that more builders view conditions as good rather than poor.

Positive growth occurred in all three areas in February – traffic of prospective buyers rose from 21 to 22; current sales increased from 25 to 30; and expected sales confidence rose from 29 to 34.

Industry experts remain cautiously optimistic, however, as the market is still very much in a state of flux. The HMI, while improving, is still at low levels. In addition, significant gaps still exist between individual markets, with foreclosures hampering growth in many areas.