Reaching its highest level in four years, builder confidence in the market for new single-family homes increased from 25 to 29 on the February NAHB/Wells Fargo Market Index (HMI), released on Wednesday. This was the fifth consecutive monthly increase in the index, which is seasonally adjusted. Scores above 50 indicate that more builders view conditions as good rather than poor.

Other Index statistics released showed a rise in traffic of prospective buyers, from 21 to 22, and sales expectations for the next six months increasing from 29 to 34. The Index component that measures current sales also rose, from 25 to 30.

National Association of Homebuilders (NAHB) Chairman Barry Rutenberg commented that, “Builder confidence has doubled since September as measured by the HMI. 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 towards more sustainable growth.”.

NAHB Chief Economist David Crowe was a bit less enthusiastic, saying that, “This is the longest period of sustained improvement we have seen in the HMI since 2007, which is encouraging, 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.”.

In addition to foreclosures (‘distressed sales’), it appears that builders are being confounded by the same problem that is putting prospective home buyers in a bind, which is the lack, so far, of a housing market price bottom. Until that point is reached and prices begin to rise again, low appraisals will continue to follow proposals, and buyers will still hesitate to sign on the dotted lines.

To contact the reporter on this story: Mark Lawson at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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