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Economy in Brief

U.S. Home Builders' Index Improves Further
by Tom Moeller  December 19, 2011

This Fall has been a good season for home builders according to the National Association of Home Builders/Wells Fargo report on housing market activity. The Composite Housing Market Index for December rose another two points to 21, its highest level since May of last year. The November reading was revised down a bit to 19. The index of single-family home sales also rose two points to 22 but still remained down from levels near 70 in 2004. The index of sales during the next six months rose one point to 26, its highest since May of last year. Finally, the home builders' index of traffic of prospective buyers jumped m/m to 18. By region performance was mixed. The index for the South jumped four points and for the West it ticked up one. For the Midwest the number was unchanged and the Northeast's figure slipped. Each of these NAHB figures is seasonally adjusted.

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 slightly in Q3 to 72.9%. It thus remained near the 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 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.

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.

Monetary Policy Implementation: Common Goals but Different Practices from the Federal Reserve Bank of New York is available here.

National Association of Home Builders Dec Nov Oct Dec'10 2011 2010 2009
Composite Housing Market Index, SA (All Good=100) 21 19 17 16 16 16 15
 Single-Family Sales 22 20 17 16 16 16 13
 Single-Family Sales: Next Six Months 26 25 23 25 23 23 24
 Traffic of Prospective Buyers 18 15 14 12 11 12 13
Northeast 15 16 14 22 17 20 17
Midwest 24 24 15 13 14 14 13
South 25 21 19 18 18 17 16
West 16 15 21 11 15 13 12
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