by Calculated Risk on 2/15/2023 10:07:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 42, up from 35 last month. Any number below 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Cautious Optimism for Builders in February

Two consecutive solid monthly gains for builder confidence, spurred in part by easing mortgage rates, signal that the housing market may be turning a corner even as builders continue to contend with high construction costs and building material supply chain logjams. Builder confidence in the market for newly built single-family homes in February rose seven points to 42, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. This is the strongest reading since September of last year.
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“While the HMI remains below the breakeven level of 50, the increase from 31 to 42 from December to February is a positive sign for the market,” said NAHB Chief Economist Robert Dietz. “Even as the Federal Reserve continues to tighten monetary policy conditions, forecasts indicate that the housing market has passed peak mortgage rates for this cycle. And while we expect ongoing volatility for mortgage rates and housing costs, the building market should be able to achieve stability in the coming months, followed by a rebound back to trend home construction levels later in 2023 and the beginning of 2024.”And while builders continue to offer a variety of incentives to attract buyers during this housing downturn, recent data indicate that the housing market is showing signs of stabilizing off a cyclical low:

• 31% of builders reduced home prices in February, down from 35% in December and 36% in November.

• The average price drop in February was 6%, down from 8% in December, and tied with 6% in November.

• 57% offered some kind of incentive in February, down from 62% in December and 59% in November.
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All three HMI indices posted gains for the second consecutive month. The HMI index gauging current sales conditions in February rose six points to 46, the component charting sales expectations in the next six months increased 11 points to 48 and the gauge measuring traffic of prospective buyers increased six points to 29.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose four points to 37, the Midwest edged one-point higher to 33, the South increased four points to 40 and the West moved three points higher to 30
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Click on graph for larger image.

This graph shows the NAHB index since Jan 1985.

This was above the consensus forecast. 

The "traffic of prospective buyers" is still well below breakeven at 29 (below 50).