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Economy in Brief

U.S. Home Builder Sentiment Declines
by Tom Moeller  June 17, 2019

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo fell to 64 during June and reversed most of its May improvement. The index remained below the expansion high of 74 reached in December of 2017. A reading of 66 had been expected in the Informa Global Markets Survey. The NAHB figures are seasonally adjusted. During the last ten years, there has been a 67% 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 declined this month. The index of present sales conditions eased to 71 from its highest level since October. It remained down from the peak of 80 in December 2017. The index of expected conditions in the next six months fell to 70 and reversed its May improvement. The recent peak in this index was 80 in February of last year.

The index measuring traffic of prospective buyers fell slightly to 48 and was below the peak of 58 reached in December 2017.

The decline in the overall index this month reflected mixed performance amongst the regional surveys. The Northeast reading fell slightly to 60, but remained up from its low of 36 in December. The index for the West eased to 69 and has been moving lower since early-2018. The reading for the South held steady at 68, but remained down versus the December 2017 high of 75. Rising to 59 was the reading for the Midwest, the highest level since October.

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 Jun May Apr Jun'18 2018 2017 2016
Composite Housing Market Index, SA (All Good=100) 64 66 63 68 67 68 61
 Single-Family Sales: Present 71 72 69 74 73 74 67
 Single-Family Sales: Next Six Months 70 72 71 75 74 76 67
 Traffic of Prospective Buyers 48 49 47 50 50 50 45
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