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Economy in Brief

U.S. Home Builder Index Weakens Considerably
by Tom Moeller  December 17, 2018

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo declined to 56 during December, its lowest level since May 2015. The figure compared to the expansion high of 74 in December of last year. For the year as a whole the index eased moderately. Expectations for December had been for an index level of 60 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 61 in December from 67 during November. It remained down from its peak of 80 last December. The index of expected conditions in the next six months weakened to 61 this month, also a twelve-month low. The recent peak in this index was 80 in February.

The index of traffic of prospective buyers eased to 43, the lowest level in just over three years. The index peaked at 58 in December last year.

Deterioration in the overall index reflected weakness throughout the country. The index for the Northeast plummeted to 37 from 61 just two months ago. The index for the Midwest declined to 52, the lowest level since May 2015. For the South, the index fell to 61 and closed in on a two-year low. The index for the West held steady m/m at 65 but also was well below the high reached twelve months ago.

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 Dec Nov Oct Dec '17 2018 2017 2016
Composite Housing Market Index, SA (All Good=100) 56 60 68 74 67 68 61
 Single-Family Sales: Present 61 67 74 80 73 74 67
 Single-Family Sales: Next Six Months 61 65 75 79 74 76 67
 Traffic of Prospective Buyers 43 45 53 58 50 50 45
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