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Economy in Brief

U.S. Home Builders' Survey At Record Low
by Tom Moeller January 22, 2009

The January Housing Market Index (HMI) from the National Association of Home Builders again reached a record low. At a level of 8 it was more than half below the year-ago figure. The index is compiled from survey questions asking builders to rate market conditions as “good”, “fair”, “poor” or “very high” to “very low”. Numerical 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.

The Home Builders Association indicated that its sub-index of present sales conditions also fell to a record low of 6. That was down from last year's average level of 16, 2007's average of 27, 2006's average of 45 and 2005's average of 73.

Builders’ expectations for sales in six months ticked up slightly month-to-month to a level of 17 but that remained down sharply from prior years. The “traffic" of prospective buyers also ticked up slightly from the record low reached in December.

Index readings were mixed last month in the country's regions. In the West the index fell hard month-to-month to a new low. It was down slightly in the Northeast, stable month-to-month in the Midwest and up in the South. Year-to-year, the sharpest decline was in the West.

Not only are builders disturbed by the market for new homes, but the assessment of conditions for remodeling a home also reached a record low during the third quarter. Expectations also fell to a record low.

The NAHB has compiled the Housing Market Index since 1985. The weights assigned to the individual index components are .5920 for single family detached sales, present time; .1358 for single family detached sales, next six months; and .2722 for traffic of prospective buyers. The results, along with other housing and remodeling indexes from NAHB Economics, are included in Haver’s SURVEYS database.

The Yield Curve, January 2009 from the Federal Reserve Bank of Cleveland is available here.

Nat'l Association of Home Builders January December   January '08 2008 2007 2006
Composite Housing Market Index 8 9 19 16 27 42
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