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Economy in Brief

U.S. Home Builders' Index Seems To Be Crawling Out of the Cellar
by Tom Moeller August 17, 2009

According to the National Association of Home Builders, the housing market continued its recent improvement during August. Their Composite Housing Market Index rose to 18 which equaled the highest level since June of last year, and it was up off the low of 8 this past January. The index is compiled from survey questions asking builders to rate market conditions as “good”, “fair”, “poor” or “very high” to “very low”. The figure is a diffusion index, therefore, numerical results over 50 indicate a predominance of “good” readings.

Also showing improvement during all of the first quarter was 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. It jumped to a record high of 72.5% buoyed by lower home prices, lower interest rates and higher income. (There is a break in the series from 2002 to 2003.)

The Home Builders Association indicated that improvement in the August figures was due to a rise in the sub-index of sales during the next six months to the highest level since April '08. At a reading of 30 the figure was double the lows of this past winter. The present sales index was stable at 16.

The strength in the August composite index reading was led by strong improvement in the Northeast to the highest level since November 2007. In the West the index also posted a firm gain to the highest level since May of 2008. In the Midwest the index rose to its highest since June '08 and in the South the index slipped after having risen this past Spring.

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.

Strong Medicine for an Ailing Economy from the Federal Reserve Bank of Atlanta can be found here.

Nat'l Association of Home Builders August July  August '08 2008 2007 2006
Composite Housing Market Index (All Good = 100) 18 17 16 16 27 42
  Single-Family Sales 16 16 16 16 27 45
  Single-Family Sales: Next Six Months 30 26 24 25 37 51
  Traffic of Prospective Buyers 16 13 13 14 21 30
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