Builder confidence inched higher in February, according to a report released today by the National Association of Home Builders.

The index gained two points to 17 this month, up from 15 in January, the report said.

The NAHB/Wells Fargo Housing Market Index is made up of three components the association uses to gauge total builder confidence. It asks for builders’ impressions of current single-family home sales and sales expectations for the next six months ("good", "fair" or "poor") and for the rate of prospective buyer traffic they’ve seen ("high to very high", "average" or "low to very low").

Two out of the three components increased month-to-month: views of current sales conditions rose two points to 17; views of sales expectation rose one point to 27; and views of buyer traffic stayed unchanged at 12, the report said.

Confidence was also eight points higher than for the same month the year before, when it was 9.

"Builders are just beginning to see the anticipated effects of the homebuyer tax credit on consumer demand. Meanwhile, another source of encouragement is the improving employment market, which is key to any sustainable economic or housing recovery," said David Crowe, the association’s chief economist.

"That said, several limiting factors are still weighing down builder expectations, including the large number of foreclosed homes on the market, the lack of available credit for new and existing projects, and inappropriately low appraisals tied to the use of distressed properties as comps."

The association has conducted the monthly builder confidence survey since 1985. Any scores over 50 for each component indicate that more builders believe sales conditions are good than poor, the association said.

The index has not seen a score over 50 since April 2006, when it was 51. The index saw its first single-digit score in November 2008, when it fell to 9 from 14 the month before.

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