Homebuilder sentiment remains near highest level since 1999

Confidence among American homebuilders held steady in February near the highest level since 1999, suggesting that demand for housing is expected to remain strong, according to data Thursday from the National Association of Home Builders/Wells Fargo.

The Housing Market Index unchanged at 72 from the prior month (matching the estimate). The measure of the six-month sales outlook climbed 2 points to 80, the highest since 2005. The current sales gauge for single-family homes cooled to 78 from 79; the index of buyer traffic remained unchanged at 54.

The report signals that home construction will continue to pick up as economic conditions remain favorable. A solid job market and rising wages will keep supporting demand for houses.

At the same time, mortgage rates have been increasing in recent weeks and could become a headwind, and rising material prices and shortages of labor remain hurdles for builders. In addition, the recent tax legislation has the potential to reduce demand in some areas because of limits on deductions for mortgage interest, and on state and local taxes.

The gauge of future sales indicates that "consumer demand for housing should grow in the months ahead," Robert Dietz, chief economist at NAHB, said in a statement. "With ongoing job creation, increasing owner-occupied household formation, and a tight supply of existing home inventory, the single-family housing sector should continue to strengthen at a gradual but consistent pace."

Regional indexes declined in the Northeast and West. The Midwest gauge rose, while the South index was unchanged. Readings greater than 50 indicate more respondents reported good market conditions.

Bloomberg News