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Home builder confidence rose in January for the fourth consecutive month as builders saw more buyer traffic and anticipated higher sales.  The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) rose four points to 25 in January to reach its highest level since June 2007.  Each of the three components of the HMI also increased for the fourth month and the improved confidence was evident across every region of the country.

The HMI is the result of a monthly survey of NAHB has conducted for 20 years.  The survey asks the Association's home builder members their perceptions of current single-family home sales and their expectations for such sales over the next six months, each graded on a scale of "good," "fair," or "poor."  The survey also asks builders to rate the current traffic of prospective buyers as "high to very high," "average," or "low to very low."  Answers to each question are used to calculate a component index and those comprise the composite index.  For each index a number over 50 indicates more builders view conditions as good than as poor.

Each of the three component indices rose three points in January.  The component measuring current sales conditions is at 25 and the index measuring traffic of prospective buyers is at 21, the highest point for each since June 2007; the index reflecting expectations for the next six months rose to 29, the highest score September 2009.

Bob Nielsen, NAHB chairman said of the results, "This good news comes on the heels of several months of gains in single-family housing starts and sales, and is yet another indication of the gradual but steady improvement that is beginning to take hold in an increasing number of housing markets nationwide. Policymakers must now take every precaution to avoid derailing this nascent recovery."

"Builders are seeing greater interest among potential buyers as employment and consumer confidence slowly improve in a growing number of markets, and this has helped to move the confidence gauge up from near-historic lows in the first half of 2011," noted NAHB Chief Economist David Crowe. "That said, caution remains the word of the day as many builders continue to voice concerns about potential clients being unable to qualify for an affordable mortgage, appraisals coming through below construction cost, and the continuing flow of foreclosed properties hitting the market."

The HMI also posted gains in all four regions in January, including a nine-point gain to 23 in the Northeast, a one-point gain to 24 in the Midwest, a two-point gain to 27 in the South and a five-point gain to 21 in the West.

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