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Economy in Brief

U.S. Home Builders' Index Increases Again
by Tom Moeller May 18, 2009

The pressure is diminishing in the U.S. housing market according to the National Association of Home Builders. Their May index of sales rose to 16, its highest level since last September and up from an upwardly revised April level. 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 rose to a reading of 14 from the upwardly revised April figure. The latest improvement lifted the index to just below last year's average level of 16.Since 1990, the year-to-year change in this index has had an 80% correlation with the year-to-year percentage change in new single-family home sales.

The index of builders’ expectations for home sales in six months also rose to its highest since September. However, the “traffic" of prospective buyers was unchanged from April but still up from the record lows of this past Winter.

Index readings in each of the country's regions have improved from the recent lows.

Individuals' assessment of conditions for remodeling also have improved. The conditions for major and minor alterations rose in the first quarter to the highest level in nearly one year and expectations rose as well.

During the fourth 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 even higher to its highest level since early 2002. It was up by nearly one half from the 2006 low due to lower home prices, lower interest rates and higher income. (There is a break in the series from 2002 to 2003.)

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 Role of Information in the Rise in Consumer Bankruptcies from the Federal Reserve Bank of Richmond is available here.

Nat'l Association of Home Builders May April  May '08 2008 2007 2006
Composite Housing Market Index (All Good = 100) 16 14 19 16 27 42
  Single-Family Sales 14 12 17 16 27 45
  Single-Family Sales: Next Six Months 27 24 28 25 37 51
  Traffic of Prospective Buyers 13 13 18 14 21 30
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