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Economy in Brief

U.S. Home Builders' Index Jumps To Highest Since 2007
by Tom Moeller  January 18, 2012

The housing sector is convincingly on the mend according to the latest National Association of Home Builders/Wells Fargo report on housing market activity. The Composite Housing Market Index for January rose another four points to 25, its highest level since June, 2007. Earlier numbers were unrevised. The index of single-family home sales rose three points to 25, also the highest since 2007 but down from levels near 70 in 2004. The index of sales during the next six months rose three points to 29, its highest since 2007. Finally, the home builders' index of traffic of prospective buyers jumped m/m to 21. By region performance was uniformly positive with the Northeast up 9 points and the West up five points. Lesser gains were logged in the Midwest and the South. 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.

National Association of Home Builders Jan Dec Nov Jan'10 2011 2010 2009
Composite Housing Market Index, SA (All Good=100) 25 21 19 16 16 16 15
 Single-Family Sales 25 22 20 15 16 16 13
 Single-Family Sales: Next Six Months 29 26 25 24 23 23 24
 Traffic of Prospective Buyers 21 18 15 12 11 12 13
Northeast 23 14 16 20 17 20 17
Midwest 24 23 24 13 14 14 13
South 27 25 21 17 18 17 16
West 21 16 15 15 15 13 12
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