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Economy in Brief

U.S. Home Builders' Index Recovery Stuttering This Month
by Tom Moeller October 19, 2009

Housing continues to turn the corner toward recovery, but of late that recovery stuttered. The National Association of Home Builders reported that its October Composite Housing Market Index fell to 18 from 19 in September. Though the index remained double the low of 8 this past January, it's rate of improvement has slowed since the Spring. 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.

The sub-index of sales during the next six months fell to 27 which was the lowest level since August. The present sales index also fell to 17 which equaled the 3Q average. Much of easing in the October composite index was due to a sharp decline in the West (+27.3% y/y). In the Midwest (+30.5% y/y) and in the South (+12.5% y/y) the index fell slightly while in the Northeast (+56.3% y/y) there was a continued gain.

The Home Builders' Association also reported that traffic of prospective buyers slipped during October after firm gains this past Spring and Summer.

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, fell slightly in the second quarter. It had jumped earlier 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 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.

Asia and the Global Financial Crisis is today's speech by Fed Chairman Ben S. Bernanke and it can be found here.

Nat'l Association of Home Builders October September  October '08 2008 2007 2006
Composite Housing Market Index (All Good = 100) 18 19 14 16 27 42
  Single-Family Sales 17 18 14 16 27 45
  Single-Family Sales: Next Six Months 27 29 19 25 37 51
  Traffic of Prospective Buyers 14 17 11 14 21 30
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