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Economy in Brief

U.S. Home Builder Sentiment Remains Firm
by Tom Moeller  November 18, 2019

Following four consecutive months of increase, the Composite Housing Market Index from the National Association of Home Builders-Wells Fargo eased during November. The 1.4% decline from October to 70 left the index up 16.7% y/y, and up by one-quarter since the December 2018 low. The latest figure was slightly below the expansion high of 74 reached in December 2017. Stability at 71 had been expected in the INFORMA Global Markets survey. The NAHB figures are seasonally adjusted. Over the past 15 years, there has been a 70% correlation between the y/y change in the home builders index and the y/y change in new plus existing home sales.

The index of present sales conditions fell 2.8% to 76 (+13.4% y/y) from 78 in October. It remained 24.6% above the low of 61 reached last December. The index of expected conditions in the next six months increased 1.3% (18.5% y/y) to 77 following an 8.6% October rise. The index measuring traffic of prospective buyers eased 1.9% (+17.8% y/y) to 53 this month from October's 54. It has increased 23.3% since the December low.

Regional readings indicated a 5.0% increase (21.2% y/y) in the Northeast to 63. In the West the index gained 2.8% (30.8% y/y) to 85, the highest level since December 2016. In the Midwest the index rose 1.8% (7.4% y/y) after two consecutive months of decline. The index for the South declined 2.6% (+13.8% y/y) but remained near the expansion high.

The NAHB has compiled the Housing Market Index since 1985. It reflects survey questions which ask builders to rate sales and sales expectations as "good," "fair" or "poor" and traffic as "very high," "average" or "very low." The figures are diffusion indexes with values over 50 indicating a predominance of "good"/"very high" readings. In constructing the composite index, 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 six months, and 0.2722 for traffic of prospective buyers. These data are included in Haver's SURVEYS database.

National Association of Home Builders Nov Oct Sep Nov Y/Y 2018 2017 2016
Composite Housing Market Index, SA (All Good=100) 70 71 68 16.7% 67 68 61
 Single-Family Sales: Present 76 78 75 13.4 73 74 67
 Single-Family Sales: Next Six Months 77 76 70 18.5 74 76 67
 Traffic of Prospective Buyers 53 54 50 17.8 50 50 45
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