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Economy in Brief

U.S. Home Builders' Survey Ticked Up Slightly
by Tom Moeller February 17, 2009

The Housing Market Index (HMI) from the National Association of Home Builders ticked up this month after having reached the record low in January. At nine the figure still was, however, less than half 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.

The Home Builders Association indicated that its sub-index of present sales conditions also ticked higher to 7 from the record low reached in January. The latest figure remained well below last year's average level of 16, 2007's average of 27, 2006's average of 45 and 2005's average of 73.Since 1990, the year-to-year change in this index has had an 85% correlation with the year-to-year percentage change in new single-family home sales.

The index of builders’ expectations for sales in six months fell to a record low but the “traffic" of prospective buyers ticked up slightly for the second consecutive month from its record low.

Index readings ticked up slightly last month in each of the country's regions except the Northeast where the index plumbed a new low.

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 fourth quarter. Expectations also fell to a record low.

During the third quarter the Home Builders' Housing Opportunity Index, which is the share of homes sold that could be considered affordable to a family earning the median income, rose to its highest level since early 2004. It was up by more than one-third from the 2006 low due to lower home prices, lower interest rates and higher income.

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.

Credit Easing: A Policy for a Time of Financial Crisis from the Federal Reserve Bank of Cleveland is available here.

Nat'l Association of Home Builders February January    February '08 2008 2007 2006
Composite Housing Market Index (All Good = 100) 9 8 20 16 27 42
  Single-Family Sales 7 6 20 16 27 45
  Single-Family Sales: Next Six Months 15 17 27 25 37 51
  Traffic of Prospective Buyers 11 8 19 14 21 30
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