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Economy in Brief

U.S. Home Builder Index Deteriorates Sharply
by Tom Moeller  November 19, 2018

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo declined to 60 during November from 68 in October. It was the lowest reading since August 2016 and compared to the expansion high of 74 in December of last year. Expectations had been for an index level of 68 in the Informa Global Markets Survey. The NAHB figures are seasonally adjusted. During the last ten years, there has been a 53% 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 fell to 67 in November from 74 during October. It remained down from its peak of 80 last December. The index of expected conditions in the next six months weakened to 65 this month, also an eleven-month low. The recent peak in this index was 80 in February.

The index of traffic of prospective buyers backpedaled to 45 from 53 and was the lowest level in just over two years. The index peaked at 58 in December last year.

Deterioration in the overall index reflected declines throughout the country. The index for the West fell to 65 this month from 74, standing now at the lowest level since September 2015. In the South, the index declined to 65 from 70. It was the lowest point since September of last year. The housing market index in the Midwest dropped to 54 from 60, remaining well below the peak of 76 reached in December, 2017. In the Northeast, the housing market index fell to 52 from 61, sliding to the lowest point in three months.

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 Nov Oct Sep Nov '17 2017 2016 2015
Composite Housing Market Index, SA (All Good=100) 60 68 67 69 68 61 59
 Single-Family Sales: Present 67 74 73 77 74 67 64
 Single-Family Sales: Next Six Months 65 75 74 76 76 67 66
 Traffic of Prospective Buyers 45 53 49 50 50 45 43
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