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Economy in Brief

NAHB Housing Market Index Lowest Since 1995
by Tom Moeller May 15, 2006

The National Association of Home Builders' (NAHB) reported that the May Composite Housing Market Index dropped 11.8% from April to the lowest level since June 1995. The figure was quite a bit weaker than Consensus expectations for stability at 50 and was one-third below the level of May 2005.

During the last twenty years there has been an 82% correlation between the y/y change in the annual composite index and the change in single family housing starts and there has been a 75% correlation between the current sales index and new single family home sales.

The sub indexes covering current sales of single family homes (-34.2% y/y) and sales in six months (-29.9% y/y) both fell roughly 9% month-to-month.

An index of the traffic of prospective home buyers plunged 17.9% m/m, also to more than a ten year low (-39.6% y/y).

Housing markets around the country weakened in May with the index for the Northeast off 6.0% (-32.9% y/y) and in the Midwest it fell 6.3% (-40.0% y/y). Out West the housing market index dropped 11.6% (-27.4% y/y) and in the South it fell 10.5% (-32.0% y/y).

The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.

Visit the National Association of Home Builders.

Nat'l Association of Home Builders May April May '05 2005 2004 2003
Composite Housing Market Index 45 51 70 67 68 64
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