Home Builder Confidence Grows in Face of Low Mortgage Rates

Home builders‘ confidence rose in February, all the way to its highest level since June 2006.

The main reason? In the wake of low mortgage interest rates and sales incentives, demand rose across the country, the National Association of Home Builders said on Thursday.

The NAHB/Wells Fargo Housing Market Index jumped to 40 from 35 in January, its highest reading since hitting 42 in June 2006, the group said. The index has also rebounded from a 15-year low of 30 notched in September 2006.

Economists polled by Reuters had forecast the index to be unchanged. Readings below 50 indicate more builders view their market conditions as poor rather than favorable.

“The … results are consistent with Federal Reserve Chairman Ben Bernanke’s assessment to Congress this week that there are signs of stabilization on the demand side of the housing market,” said David Seiders, Chief Economist at NAHB.

Lower energy prices, favorable mortgage rates and growth in employment and household income have contributed to the recent stabilization of buying demand, he said in a release.

“In addition, builders continue to offer substantial sales incentives to move their product and limit cancellations, which has helped to firm up buyer demand,” he added.

Mortgage finance company Freddie Mac said interest rates on U.S. 30-year mortgages averaged 6.22 percent in January, up from 6.14 percent in December. Rates on 15-year mortgages averaged 5.97 percent, up from December’s 5.88 percent.

Rates on 30-year mortgages, however, were down from last year’s high of 6.76 percent in July. Rates on 15-year home mortgages were also below last year’s high of 6.39 percent in July.