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Economy in Brief

U.S. Home Builders Index Buoyed By Heavy Traffic
by Tom Moeller  July 17, 2012

The National Association of Home Builders/Wells Fargo reported that its Composite Housing Market Index jumped this month to 35 from an unrevised 29 in June. The latest figure was the highest since March 2007. More individuals are out looking for new homes. The home builders' index of traffic of prospective buyers jumped six points to 29, its highest level since May 2006. And sales are increasing. The index of single-family home sales also rose six points to 37, the highest since 2007 but still down from levels near 70 in 2004. The index of sales during the next six months jumped even more m/m to 44.

By region, the West's index rose twelve points to a new cycle high followed by the Northeast where the index increased eight points. The index for the South rose five points to the highest level since May 2007. The Midwest's index rose a lesser three points but it was to the highest level since March 2006. 

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 Q1'12 to a record 77.5%, 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 Jul Jun May Jul '11 2011 2010 2009
Composite Housing Market Index, SA (All Good=100) 35 29 28 15 16 16 15
 Single-Family Sales 37 31 30 15 16 16 13
 Single-Family Sales: Next Six Months 44 33 34 21 22 23 24
 Traffic of Prospective Buyers 29 23 23 12 13 12 13
Northeast 36 28 31 15 17 20 17
Midwest 34 31 26 12 14 14 13
South 32 27 28 17 18 17 16
West 44 32 29 14 15 13 12
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