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Economy in Brief

Home Builders' Survey Shows Tentative Signs of Stabilization
by Carol Stone August 18, 2008

The National Association of Home Builders reported a stable performance in its Housing Market Index (HMI) for August, albeit at the index’s all-time low of 16, first seen in July. It stood at 22 this time last year and averaged 19 for the first six months of 2008. The index is compiled from survey questions asking builders to rate market conditions as “good”, “fair” or “poor” or “very high” to “very low”. Numerical equivalent results over 50 indicate a predominance of “good” readings.

Since 1990, the year-to-year change in this index has had a correlation of 72% with the year-to-year percentage change in new single-family home sales (see graph). One wonders, then, if the relative improvement in the HMI might be a precursor to an outright improvement in home sales.

In this regard, the Home Builders Association press release highlights the gains in two of the HMI components. Present sales conditions ticked up from 15 in July to 16 this month and builders’ expectations for six months out moved from 23 to 25. The most tangible measure, the “traffic of prospective buyers” held steady at its all-time low of 12. By region, two parts of the country showed increases, the Northeast and the Midwest. The South was steady and conditions in the West continued to erode. These readings ranged from 11 to 20.

The NAHB has compiled the Housing Market Index since 1985. The results, along with other housing and remodeling indexes from NAHB Economics, are included in Haver’s SURVEYS database.

Nat'l Association of Home Builders August July   Aug '07 2007 2006 2005
Composite Housing Market Index 16 16 22 27 42 67
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