US Builder Confidence Trends Higher for Third Consecutive Month in February

On Thursday, the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) reported that builder sentiment in the market for newly built single-family homes increased 4 points to a reading of 48 in February. This is the third consecutive monthly increase in the HMI and the highest level since August 2023.

All three of the major HMI indices posted gains in February.

• The HMI index charting current sales conditions increased 4 points to a reading of 52.
• The component measuring sales expectations in the next six months rose 3 points to a reading of 60.
• The component gauging traffic of prospective buyers climbed 4 points to a reading of 33.

All four regions saw increases in their three-month moving average HMI score.

• The Northeast increased 3 points to a reading of 57.
• The Midwest inched 2 points higher to a reading of 36.
• The South climbed 5 points to a reading of 46.
• The West posted a 6-point increase to a reading of 38.

In their commentary on the February HMI, the NAHB notes that with mortgage rates now below 7% since mid-December, more builders are cutting back on reducing home prices to boost sales. In February, 25% of builders reported cutting home prices, down from 31% in January and from 36% in the last two months of 2023. However, the average price reduction in February held steady at 6% for the eighth straight month. Meanwhile, the use of sales incentives is also diminishing. The share of builders offering some form of incentive dropped to 58% in February, down from 62% in January and the lowest share since last August.