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Economy in Brief

U.S. Home Builders’ Index Deteriorates
by Tom MoellerMarch 15, 2010

Poor weather in much of the country likely affected housing market activity during 1Q. The National Association of Home Builders' index of housing market activity fell this month to 15 from 17 in February and for 1Q the index's average level was the lowest since 2Q '09. 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 fell m/m to 15 from 17 and for the second quarter also was the lowest since 2Q '09. The index of sales during the next six months also deteriorated to the lowest level since April of last year.The Home Builders' Association also reported that the traffic of prospective buyers fell to the lowest level in twelve months.

Supporting the notion of a strong weather factor was a sharp decline in the Builders' index for the Midwest and in Northeast for 1Q. In the South the index showed gains of one-quarter versus last year during 1Q. The index for the West slipped through the quarter but remained double the year-ago level.

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, slipped during 4Q '09 (the latest available figure) to 70.8%. 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.)

Nat'l Association of Home Builders March February January  March '09 2009 2008 2007
Composite Housing Market Index (All Good=100) 15 17 15 9 15 16 27
  Single-Family Sales 15 17 15 8 13 16 27
  Single-Family Sales: Next Six Months 24 27 26 15 24 25 37
  Traffic of Prospective Buyers 10 12 12 9 13 14 21
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