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Housing Market Index Highest in Nearly Five Years: NAHB

The ""National Home Builders Association"":http://www.nahb.org/ (NAHB) released a housing market index that improved to 29 in February, its highest level since May 2007, with all three of the components showing new strength.

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The trade group said that it was the fifth consecutive monthly increase, the longest stretch of consecutive monthly increases since April- October 1995.

The current conditions index rose to 30, a five-point jump, the largest month-over-month gain since April 2010. The forecast component, assessing conditions six months out, also increased by five points to 34, doubling in just five months.

The index of buyer traffic to showrooms and model homes rose just one point to 22, also double where it stood last September.

The overall index is more than twice the level of 14 last September.

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The index, built based on surveys conducted jointly by the NAHB and Wells Fargo, 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 from 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.

Despite the February increase and the string of higher values, the index remained below the ""break-even"" level of 50 for the 70th consecutive month.

NAHB Chief Economist David Crowe appropriately acknowledged the index ""is still very low, and several factors continue to constrain the market.""

He cited foreclosures as ""still competing with new home sales,"" adding ""many builders are seeing appraisals come in at less than the cost of construction."" At the same time, he said, ""prospective home buyers are finding it difficult to qualify for a mortgage.""

Indeed, despite the month-month increases in the overall index and particularly the traffic component, new home sales have not matched the trend, in fact falling month-month in the last report.

While the HMI has doubled since September, new home sales have barely budged, last reported at a seasonally adjusted annual rate of 307,000 compared with an SAAR of 302,000 in September.

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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