Builders' confidence rises for fifth straight month

Home builder confidence in the market for new single-family homes increased for the fifth consecutive month in February, as optimism grows around the still struggling housing market. 

Confidence rose from 25 to 29 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released on Wednesday, the highest level in more than four years.

"Builder confidence has doubled since September as measured by the HMI," said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. "Given the recent improvements in new home starts and the increasing number of markets included in the NAHB/First American Improving Markets Index, this consistency suggests that the housing market is moving toward more sustainable growth."

Still, the housing sector remains fragile — more foreclosures could be coming onto the market following a settlement between states and the federal government and several of the nation's largest banks over repossession abuses — and could still be at least two years away from a full recovery. 

"This is the longest period of sustained improvement we have seen in the HMI since 2007, which is encouraging," said David Crowe, NAHB's chief economist. 

"However, it is important to remember that the HMI is still very low, and several factors continue to constrain the market," he said. 

Foreclosures are still competing with new home sales, builders are seeing appraisals come in at less than the cost of construction, and prospective home buyers aren't finding it difficult to get a loan for a purchase, Crowe said. 

More good news: each of the index's three components also improved for a fifth consecutive month in February. The index measuring traffic of prospective buyers rose to 22 from 21, the component measuring sales expectations for the next six months increased to 34 from 29, while the index that gauges current sales rose to 30 from 25.