Home Builder Sentiment Continues to Rise

February 16, 2012

U.S. builder confidence in the market for newly constructed homes rose to its highest level this month in nearly five years.

According to the National Association of Home Builders/Wells Fargo Housing Market Index, home builder sentiment rose from 25 to 29 in February to mark its fifth consecutive increase and the highest index reading since May of 2007.

new construction home“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.”

An index reading above 50 means builders see conditions as good rather than poor. The gauge has not been that high since April 2006.

Still, each of the HMI’s components rose for the fifth straight month in February as well.

*The component measuring traffic of prospective buyers rose from 21 to 22.

*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.

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

Categories: New Homes

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