A Wells Fargo survey of homebuilder sales managers across the nation not only points to an improvement in the housing industry, but also gave fire to homebuilder stock prices on Wednesday.

March historically is the most important month of the year for new home sales, adding significance to the results that show momentum is building, which could further motivate on-the-fence buyers.

Each month, Wells Fargo surveys 150 sales managers at homebuilding tracts in 20 markets throughout the U.S., asking about customer traffic, sales and pricing trends.

“March's results demonstrate continued strength in all metrics,” the survey report states. “In particular, relative to sales managers expectations, sales rates recorded their strongest levels since we began conducting our survey in 2001, topping the previous record high last month.”

On release of the news, homebuilder stocks rallied on Wednesday. KB Home (+3%), Toll Brothers (+4%), PulteGroup (+9%), Lennar (+5%), D.R. Hortion (+5%) and Beazer (+7%) all saw their stock prices gain momentum.

For an in-depth analysis of the future of the homebuilding industry, check out "A Builder Breakdown" in the lastest issue of HousingWire magazine.

The survey received the highest positive response rate in its history when 63% of sales managers said sales were better than expected, marking the third consecutive month of peak results. Slightly more than 13% cited worse-than-expected orders, down slightly from 23% a year earlier.

More than 75% of managers reported better-than-expected sales in the following markets: Phoenix, the Inland Empire, Indianapolis, Houston, and Tampa and Chicago.

Sales managers saw a decline in both the amount and quality of consumer traffic relative to February. In both categories, 55% of them reported better-than-expected business versus about 37% a year earlier. Historically, the survey runs at about 40% in March.

The bank’s fourth metric, pricing, improved both sequentially and year-over-year, with commentary from sales managers indicating that buyer confidence is returning as the resale market improves and inventory shrinks. More than 35% of managers increased based prices in March versus 30% in February. Not since April 2006 has the survey shown such strong pricing.

“Sales managers also suggested there is a sense of urgency in the marketplace as buyers anticipate higher home prices and/or mortgage rates,” the report states. “Negatively, strict lending conditions continue to pressure the market.”

However, the real estate market continues to putt along with housing starts falling to an annualized rate of 698,000 in February 2012, down from 702,000 in January. Housing starts have been flat since January 2010.

Home sales are telling another story. In February, sales increased 11.5% from a year earlier to 280,100 units, according to CoreLogic. Over the past 12 months ending in February, 3.9 million homes were sold, slightly above the pace set in calendar year 2011 levels while still below 2010's pace when the market was aided by homebuyer-tax credits.

The strongest markets in March were Phoenix, Northern California and the Midwest markets (Chicago, Denver, and Indianapolis). Phoenix, Denver and Northern California also showed strength last month. Conversely, Philadelphia, Orlando, Fla. and Tampa, Fla. were the weakest.

Click on the image below for the detailed results of the Wells Fargo's survey.

In response to the survey, a sales manager in Chicago said, “Buyers have started to go on their ‘Parade of Homes’ using a map of all the builders. Prices are starting to go up. Our company nationwide saw the best sales in March since 2007.”

As an indication that housing is local, a sales manager in Orlando, Fla. said, “I think it’s the buyer’s inability to qualify that’s impacting our sales. There is a lot of inventory in the area.”

jhilley@housingwire.com

@JustinHilley