Builder confidence climbs in February

Builder sentiment edged upward in February, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

Builder confidence increased one point to 84 as strong demand from home buyers helped offset supply change challenges along with high lumber prices, the NAHB said. 

Lumber prices have continued to increase this year, hitting a record high in mid-February. As a result, the NAHB says thousands of dollars are being added to the cost of new homes. In some cases, home builders are being forced to halt projects. This arrives at a time when housing inventories are near an all-time low.

Housing demand remains strong though, fueled by low mortgage rates along with a shift to the suburbs and lower-cost markets. 

The NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “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 conditions as good than poor.

The HMI index gauging current sales conditions held steady at 90, while the component measuring sales expectations in the next six months fell three points to 80. The gauge charting traffic of prospective buyers rose four points to 72.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose two points to 78, the Midwest fell one point to 81, the South dropped two points to 84 and the West posted a two-point loss to 93.

The full February 2021 HMI tables can be found at nahb.org/hmi.