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Homebuilder Sentiment Cools in February

construction-twoHomebuilder confidence experienced a backslide this month, but hopes for home sales later this year remained high.

The National Association of Home Builders (NAHB)/Wells Fargo builder sentiment index fell two points in the association's February reading, coming in at 55 for the month, the group said Tuesday.

The index gauges builder reports about current new single-family home sales, expected sales in the next six months, and traffic from prospective buyers. A reading above 50 shows builders have a largely positive view of the market.

NAHB Chairman Tom Woods said February's slight decline is "largely attributable to the unusually high snow levels across much of the nation," which may have hampered buyer activity earlier in the month. That narrative is similar to a year ago, when the confidence gauge slipped to 46 on harsh weather conditions throughout the country.

Two of the three index components dropped this month, with the measure of current sales conditions slipping one point to 61 and the gauge of buyer traffic falling off five points to 39. The component charting sales expectations didn't move, holding at 60.

Regionally, the Midwest posted the biggest drop in sentiment, lending weight to the group's theory that weather played a role in dwindling confidence. The index for that region was down 10 points from January to 49.

At the same time, the weather-battered Northeast saw a five-point pickup in builder confidence to a reading of 48. Robert Dietz, an economist for NAHB, said the story for that area "is probably an issue of levels."

"The Northeast component is considerably lower than the Midwest, South, and West, so it did tick up," Dietz said. "It began to rise late in the year last year, and so I think that cyclical effect is dominating the weather effect in that case."

Meanwhile, the South and West, which both have been left mostly unscathed by this month's storms, held more or less steady at readings of 56 and 64, respectively.

As far as the rest of the year goes, NAHB expects to see improvements in home sales activity as a number of factors come together to create a better buying environment.

"Solid job growth, affordable home prices and historically low mortgage rates should help unleash growing pent-up demand and keep the housing market moving forward in the year ahead," said the group's chief economist, David Crowe.

About Author: Tory Barringer

Tory Barringer began his journalism career in early 2011, working as a writer for the University of Texas at Arlington's student newspaper before joining the DS News team in 2012. In addition to contributing to DSNews.com, he is also the online editor for DS News' sister publication, MReport, which focuses on mortgage banking news.
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