Home Builder Sentiment at Nearly 5-Year High

U.S. home builder sentiment rose in February to the highest level in nearly five years, a clear sign of improvement for an industry trying to climb out of a deep slump.

The National Association of Home Builders says its housing market index grew to 29 from 25 in January. The increase was the fifth in a row and carried the index to its highest since May 2007. The results were better than expected. Economists polled by Dow Jones Newswires had forecast a reading of 26.

Historically, the reading still is low. A reading above 50 in the NAHB index would mean more builders view conditions as good rather than poor. The gauge has not been in positive territory since April 2006.

This is the longest period of sustained improvement we have seen…since 2007.

Foreclosures are still competing with new-home sales. Many builders are seeing appraisals come in at less than the cost of construction. Additionally, prospective home buyers are finding it difficult to qualify for a mortgage.

All three components of the builders' index increased. Builders' assessment of traffic from potential buyers, current sales conditions, and builders' expectations for sales over the next six months all reached the highest point since mid-2007.

The February index was based on a survey of 389 builders.