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Economy in Brief

U.S. Home Builder Sentiment Improves Again
by Tom Moeller  May 15, 2019

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo rose to 66 during May, the highest level since October. Despite the improvement, the index remained below the expansion high of 74 reached in December of 2017. A reading of 64 was expected in the Informa Global Markets Survey. The NAHB figures are seasonally adjusted. During the last ten years, there has been a 58% correlation between the y/y change in the home builders index and the y/y change in new plus existing home sales.

Each of the index components improved modestly this month. The index of present sales conditions rose to 72, its highest level since October. The level of the index remained down, however, from its peak of 80 in December 2017. The index of expected conditions in the next six months rose to 72 and reversed the prior month's decline. The recent peak in this index was 80 in February of last year.

The index measuring traffic of prospective buyers rose to 49. It reached the highest level since October, but still was below the peak of 58 reached in December 2017.

The rise in the overall index this month reflected a surge in the Northeast reading to a near-record high of 65, up from its low of 36 in December. The index for the West improved to 74, its highest level in seven months. The reading for the Midwest held steady at 56, equaling its highest level since October. Rising to 67 was the reading for the South, but that left it below the high of 70 in March.

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 May Apr Mar May'18 2018 2017 2016
Composite Housing Market Index, SA (All Good=100) 66 63 62 70 67 68 61
 Single-Family Sales: Present 72 69 68 76 73 74 67
 Single-Family Sales: Next Six Months 72 71 72 77 74 76 67
 Traffic of Prospective Buyers 49 47 44 51 50 50 45
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