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Home Builder Confidence Jumps in February to Four-Month High

Home Builder Confidence Jumps in February to Four-Month High

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The numbers: The National Association of Home Builders’ monthly confidence index jumped 4 points to a seasonally adjusted reading of 62 in February, the trade group said Tuesday.

What happened: The February gain was the second in a row and put the sentiment index, which some economists view as an early read on the pace of residential construction, back to its mid-autumn level. It easily beat the Econoday consensus forecast of a one-point increase.

In February, the index component that tracks views of current sales conditions rose three points to a reading of 67, and the tracker of expectations for the next six months jumped five points to 68. The measure of buyer traffic rose four points to 48.

Any reading over 50 signals improvement, but the buyer traffic component is rarely above 50, even in the go-go days of the housing bubble a decade ago.

Big picture: Builders are in a sweet spot: economic conditions like a strong job market are helping them sell more homes, and falling mortgage rates are making that job even easier. But NAHB continued to note that “affordability remains a critical issue.” Builders say regulations are still “excessive,” and the Trump administration’s tariffs have made raw materials much more expensive.

What they’re saying: The housing market slowdown of 2018 is starting to look like a pause, rather than the beginning of the end for the cycle. In January, mortgage purchase applications for new homes jumped 43% compared to December, slightly edging last January’s tally to touch the highest level since 2013, the Mortgage Bankers Association said last week.

Market reaction: Investors have boosted the stock prices of large publicly-traded builders this year. Shares of Meritage Homes Corporation are up 21% in the year to date, with shares of KB Home right behind.

The S&P 500 has gained about 11% this year.

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