Home Builder Confidence Reaches Highest Level in Four Years

Home builder confidence in the market for new single-family homes rose to its highest level in more than four years in February, according to a new survey released on Wednesday.


Confidence on the National Association of Home Builder's monthly sentiment index jumped 4 points to 29. Fifty, however, is still the line between positive and negative sentiment.

“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.”

Each of the index’s three components improved for a fifth consecutive month in February. The component measuring traffic of prospective buyers rose to 22 from 21 while the component measuring sales expectations for the next six months increased to 34 from 29. The component measuring current sales increased to 30 from 25.

Although the index showed signs of improvement, NAHB Chairman Barry Rutenberg cautioned that the housing sector remains fragile with differences in housing strength between individual markets.

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