Sentiment among home builders rose for the third straight month in February, reaching the highest level since last August per the National Association of Home Builders (NAHB). Their Housing Market Index climbed four points to 48 and while this is still in contraction territory, the reading is just shy of the key breakeven level of 50. Any score over 50 on this index, which runs from 0 to 100, signals that more builders view conditions as good than poor.
All three index components posted gains this month, with current and future sales expectations now both in expansion territory while buyer traffic also moved higher.
What’s the bottom line? NAHB Chair Alicia Huey noted that pent-up demand should result in more buyers entering the market if mortgage rates continue to decline this year, and this expectation was one factor that helped builder confidence improve. The NAHB also pointed to the lack of existing home inventory and the prospect of future rate cuts by the Fed as additional reasons why builders were feeling more positive this month.