The National Association of Home Builders (NAHB) Housing Market Index, which is a near real-time read on builder confidence, rose seven points to 42 in February. All three components of the index posted gains, with current sales conditions rising six points to 46, sales expectations for the next six months up eleven points to 48, and buyer traffic moving six points higher to 29. Any reading above 50 on this index, which runs from 0 to 100, signals expansion while readings below 50 signal contraction.

What’s the bottom line? The rise in confidence among home builders in both January and February of this year follows declines seen every month last year. February’s reading also marks the strongest one-month gain in 10 years. This could signal the start of an upward trend, which would be encouraging for buyers facing limited supply. NAHB Chief Economist Robert Dietz noted, “While the HMI remains below the breakeven level of 50, the increase from 31 to 42 from December to February is a positive sign for the market.”