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Economy in Brief

U.S. Home Builder Index Improves, but Remains Below Last Year's High
by Tom Moeller  October 16, 2018

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo inched up during October to 68 from an unrevised 67 in September. Despite the gain, the index remained below its December 2017 high of 74. Expectations had been for an index level of 67 in the Informa Global Markets Survey. The NAHB figures are seasonally adjusted. During the last ten years, there has been a 54% correlation between the y/y change in the home builders index and the y/y change in new home sales.

The index of present sales conditions improved to 74 in October from 73 during the prior two months. It remained down, however, from its peak of 80 last December. The index of expected conditions in the next six months increased to 75 this month, the highest level since June. The recent peak in this index was 80 in February.

The index of traffic of prospective buyers jumped to 53 from 49 and was the highest level since February. The index peaked at 58 in December last year.

Improvement in the overall index reflected broad-based regional gains throughout the country. The index for the Northeast region jumped to 64 this month, the highest level since October 2005. In the West, the index improved m/m to 75 but remained below the December high of 84. In the South, the index gained to 71 and recouped most of its September decline. For the Midwest, the housing market index held steady at 56, remaining well below the peak of 76 reached in December, 2017.

The NAHB has compiled the Housing Market Index since 1985. It reflects 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 six over 50 indicating a predominance of "good" readings. The weights assigned to the individual index components are 0.5920 for single-family detached sales, present time, 0.1358 for single-family detached sales, next months and 0.2722 for traffic of prospective buyers. The results are included in Haver's SURVEYS database. The expectations figure is available in Haver's MMSAMER database.

National Association of Home Builders Oct Sep Aug Oct '17 2017 2016 2015
Composite Housing Market Index, SA (All Good=100) 68 67 67 68 68 61 59
 Single-Family Sales: Present 74 73 73 75 74 67 64
 Single-Family Sales: Next Six Months 75 74 72 78 76 67 66
 Traffic of Prospective Buyers 53 49 49 48 50 45 43
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