"Following solid gains over the past year, builder confidence has essentially leveled out and held in the same three-point range over the last four months," noted NAHB Chairman Rick Judson, a home builder from Charlotte, N.C.
"This is partly due to ongoing uncertainties about job growth and consumer access to mortgage credit," he added, "but it's also a reflection of the fact that builders are now confronting rising costs for building materials and, in some markets, limited availability of labor and lots as demand for new homes strengthens."
NAHB Chief Economist David Crowe agreed.
"Having risen strongly in 2012, the HMI hit a slight pause in the beginning of this year as builders adjusted their expectations to reflect the pace at which consumers are moving forward on new-home purchases," he observed. "The index remains near its highest level since May of 2006, and we expect home building to continue on a modest rising trajectory this year."
Derived from a monthly survey that NAHB has been conducting for 25 years, the NAHB/Wells Fargo Housing Market Index 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.
Holding above the critical mid-point of 50 for a third consecutive month, the HMI component gauging current sales conditions fell by a single point to 51 in February. Meanwhile, the component gauging sales expectations in the next six months rose by one point, to 50, and the component gauging traffic of prospective buyers slipped four points, to 32.
Three-month moving averages for each region's HMI score were mixed in February, with the Northeast up three points to 39 and the West up four points to 55, and the Midwest and South each down two points, to 48 and 47, respectively.