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Economy in Brief

U.S. Home Builder Index Improves
by Tom Moeller  January 16, 2019

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo rose to 58 during January after falling sharply during December to 56, its lowest level since May 2015. The figure compared to the expansion high of 74 in December of 2017. Expectations had been for an index level of 56 in the Informa Global Markets Survey. The NAHB figures are seasonally adjusted. During the last ten years, there has been a 49% 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 rose to 63 this month from 61 during December. It remained down from its peak of 80 in December 2017. The index of expected conditions in the next six months increased to 64 from 61. The recent peak in this index was 80 in February of last year.

The index of traffic of prospective buyers rose to 44 from 43, which was the lowest level in just over three years. The index peaked at 58 in December 2017.

The rise in the January index was driven by a sharp m/m increase in the Northeast to 49, but it remained down sharply y/y. The index for the West rose moderately to 70, but was below 83 twelve months earlier. For the South, the index held steady at 61, the lowest point since July 2016. The index for the Midwest fell sharply to 49, the weakest level since May 2015 and down from the peak of 76 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 Jan Dec Nov Jan'18 2018 2017 2016
Composite Housing Market Index, SA (All Good=100) 58 56 60 72 67 68 61
 Single-Family Sales: Present 63 61 67 79 73 74 67
 Single-Family Sales: Next Six Months 64 61 65 78 74 76 67
 Traffic of Prospective Buyers 44 43 45 54 50 50 45
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