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Economy in Brief

U.S. Home Builders’ Index Improves Slightly
by Tom Moeller February 16, 2010

Low interest rates and improved affordability have yet to generate strong improvement in the housing market. The National Association of Home Builders' index of housing market activity improved this month to 17 from 15 in January, but that was only back to the 4Q average. Nevertheless, the index remained double the low of 8 hit last 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 thus a diffusion index with numerical results over 50 indicating a predominance of “good” readings. 

The present sales index improved m/m to 17 and equaled the 4Q and 3Q averages. The sub-index of sales during the next six months also improved modestly versus January. The Home Builders' Association also reported that the traffic of prospective buyers languished at a reading of 12 which was below the averages from 2Q to 4Q of last year. 

The regional housing market indexes showed improvement versus last year throughout the country but there has been modest backpedaling in the Northeast & the Midwest and relative stability in the South & the West.

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 in 3Q '09 (the latest available figure) to 70.1%. 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.

 IMF Explores Contours of Future Macroeconomic Policy from the International Monetary Fund can be found here.

Nat'l Association of Home Builders February January December  February '09 2009 2008 2007
Composite Housing Market Index (All Good=100) 17 15 16 9 15 16 27
  Single-Family Sales 17 15 16 7 13 16 27
  Single-Family Sales: Next Six Months 27 26 26 15 24 25 37
  Traffic of Prospective Buyers 12 12 13 11 13 14 21
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