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Economy in Brief

U.S. Home Builders Association Index Falls Sharply
by Tom Moeller  June 15, 2011

The National Association of Home Builders reported that its June index of housing market activity fell to 13 versus an unrevised 16 in May. Though the latest figure remained above the all-time low of 8 reached in January of 2009, it was at the low end of the recent range. The figure fell short Consensus expectations for 16. During the last ten years there has been a 66% correlation between the y/y change in the index and the change in new home sales.

The Home Builders 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. During the last ten years there has been a 80% correlation between the y/y change in the index and the change in new plus existing single family home sales.

The index of single-family home sales fell to 13 and remained down from levels near 80 in 2004. The index of sales during the next six months fell to 15, the lowest since March of 2009. The home builders' index of traffic of prospective buyers fell modestly. Each of these NAHB figures is seasonally adjusted. By region, the indexes for the Midwest, South and West fell the sharply.

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, improved in Q1 to 74.6%, another record high, 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. The expectation figure is available in Haver's MMSAMER database.

National Association of Home Builders Jun May Apr Jun'10 2010 2009 2008
Composite Housing Market Index, SA (All Good=100) 13 16 16 16 16 15 16
 Single-Family Sales 13 15 15 13 16 13 16
 Single-Family Sales: Next Six Months 15 19 22 22 23 24 25
 Traffic of Prospective Buyers 12 14 13 13 12 13 14
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