Buyer demand boosted home builder confidence five points in February to its highest level in eight months, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

Based on a monthly survey that measures builder perceptions and expectations for home sales, the index climbed to 40 in February from a reading of 35 in January. An index rating above 50 indicates that more builders view sales conditions as good, while a rating below 50 indicates that more builders view conditions as poor.

“Builders are still cautious as they continue to manage their inventory, but their assessments of the demand side of the single-family market are improving,” said NAHB President Brian Catalde, a home builder from Playa del Rey, Calif. “Every component of the February HMI — present home sales, sales expectations for the next six months and buyer traffic — showed a significant positive uptick in February.”

Lower energy prices, favorable mortgage rates and solid growth in employment and household income have all contributed to the recent stabilization of home-buyer demand, said NAHB Chief Economist David Seiders. “In addition, builders continue to offer substantial sales incentives to move their product and limit cancellations, which has helped to firm up buyer demand.”

All three component indexes registered improvement in February, with the index gauging current single-family home sales rising six points to 42 and the component measuring the traffic of prospective buyers gaining five points to 31. Of particular note, the index gauging sales expectations for the next six months jumped over the 50 threshold for the first time since last June, posting a seven-point gain to 55.

The HMI rose in all four regions in February, with the Northeast posting the biggest gain of eight points to 46. Five-point gains were registered in the Midwest and South, to 29 and 46, respectively, while the West moved up two points to 35.

“Builders are becoming increasingly convinced that the abrupt downslide in home sales is in their rear view mirrors and they see better times as they look at the road ahead,” Seiders said.

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