The HMI, based on survey data for early March, rose for the second consecutive month with a two-point gain to 59.”Home builders continued to express confidence that low interest rates were helping offset effects of broader economic weakening and deteriorating consumer confidence to keep buyer demand on track,” said Bruce Smith, president of NAHB and a home builder from Walnut Creek, Calif. “It's also likely that the solid investment aspects of homeownership have buoyed housing demand as problems in the stock market have deepened.”

Smith said that March's HMI marks the highest reading of builder optimism since November of 2000 and indicates significant strength remains in the single-family housing market. However, he noted, the HMI is still 18 points below its late 1998 peak and is well below the average of the last three years.

The HMI is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years. Home builders are asked to rate current sales of single-family homes and sales expectations for the next six months as “good,” “fair” or “poor.” They are also asked to rate traffic of prospective buyers as either “high to very high,” “average” or “low to very low.” Scores for responses to each component are used to calculate a seasonally adjusted overall index, where any number over 50 indicates that more builders view sales conditions as good rather than poor.

Two out of the HMI's three component indexes posted significant gains in March. The index gauging current sales of new single-family homes rose six points to 67, while the index gauging expected sales in the next six months gained four points to 68. The index for traffic of prospective buyers fell four points to 40, following an equivalent rise in February.