Builder confidence continued to rise in February, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI increased from 35 in January to 40 in February, up from a low of 30 last September and the highest level since June of 2006, the Association reported. In speaking with industry sources, Housing Wire found most were skeptical that an increase in builder confidence would amount to an improvement of conditions in the mortgage banking industry in the near term, although most expressed hope that increasing confidence might represent a "eventual light at the end of the tunnel," as one source described it. â€œBuilders are still cautious as they continue to manage their inventory, but their assessments of the demand side of the single-family market are improving,â€? said NAHB President Brian Catalde, a home builder from Playa del Rey, Calif. â€œEvery component of the February HMI â€“ present home sales, sales expectations for the next six months and buyer traffic -- showed a significant positive uptick in February.â€? â€œThe HMI 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,â€? said NAHB Chief Economist David Seiders. The increase in builder's confidence comes amid a subprime mortgage credit crisis of sorts in the mortgage banking business, with numerous lenders failing or being acquired, which has some in the industry questioning whether the increase in builders confidence is really just an exercise in wishful thinking. "Lenders are tightening up credit standards, and the pool of subprime borrowers is drying up," said one industry source. "I'm not sure who exactly the builders expect to be able to buy their homes in the near future, since so much demand was being driven by borrowers outside of the prime and conforming markets." "We've always heard that nobody makes more land, so buy while you can. I think it's true right now to say nobody is making a larger pool of borrowers to buy that land." The NAHB said that lower energy prices, favorable mortgage rates and solid growth in employment and household income have all contributed to what it characterized as a "stabilization" of home buyer demand. Derived from a monthly survey that NAHB has been conducting for 20 years, the NAHB/Wells Fargo Housing Market Index (HMI) gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either â€œgood,â€? â€œfairâ€? or â€œpoor.â€? The survey also asks builders to rate traffic of prospective buyers as either â€œhigh to very high,â€? â€œaverageâ€? or â€œlow to very low.â€? Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor. All three component indexes registered improvement in February, the NAHB said. The index gauging current single-family home sales gained six points to 42, while the component measuring the traffic of prospective buyers rose five points to 31. Of particular note, the index gauging sales expectations for the next six months jumped over the 50 threshold for the first time since last June, posting a seven-point gain to 55. â€œBuilders are becoming increasingly convinced that the abrupt downslide in home sales is in their rear view mirrors and they see better times as they look at the road ahead,â€? said Seiders. The HMI rose in all four regions in February, with the Northeast posting the biggest gain of eight points to 46. Five-point gains were registered in the Midwest and South, to 29 and 46, respectively, while the West moved up two points to 35. For more information, visit http://www.nahb.org.