Builder Confidence Unchanged in February
Feb 16, 2006
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Indicating stabilizing conditions in the U.S. single-family housing market, home builder confidence remained unchanged in February from levels gauged in each of the past 2 months, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

February marks the third consecutive month in which the HMI has held at 57, and the second consecutive month in which there has been no change posted in the index component that gauges current single-family home sales.

"After several record-breaking years for home sales, builders are anticipating a return of the market to a healthy and steady pace," said David Pressly NAHB president. He noted that any number above 50 on the index indicates that more builders view conditions as good than poor in their markets.

"This is definitely a good sign that the housing market is stabilizing," agreed NAHB Chief Economist David Seiders. "The HMI fell significantly during the second half of 2005 as eroding affordability conditions affected home sales and builder sentiment, and the recent stabilization is consistent with the orderly cooling-down process that NAHB has been forecasting."

"There are still some significant regional variations in builder perceptions of housing market conditions," Seiders noted. "In particular, responses from builders in the West reflected much improved weather conditions in that region, accounting for a significant rebound in the area’s HMI score. By contrast, the Midwest, with its poorly performing job market, showed some further erosion in its HMI score as local builders lowered their expectations even further."

Derived from a monthly survey that NAHB has been conducting for almost 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next 6 months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as either "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

For February's HMI, the component gauging builders' perceptions of current market conditions was unchanged from January, at a still-favorable 62. Meanwhile, the component gauging sales expectations for the next 6 months and the component gauging traffic of prospective buyers each declined one point, to 65 and 40, respectively.

On a regional basis, the HMI for builders in the West rebounded strongly from a big dip in January to reach 74 -- just one point behind where it was at year-end 2005 -- and the HMI for builders in the Northeast rose a single point to 57. The HMI for builders in the South and Midwest declined by two points to 64, and by three points to 33, respectively.

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