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Economy in Brief

U.S. Home Builder Sentiment Eases
by Tom Moeller  January 16, 2020

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo slipped during January. The index level of 75 compared to 76 in December but remained up 29.3% y/y. It was nearly the highest level for the economic expansion. A reading of 75 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 3.6% to 81 (+26.6% y/y) after strengthening to 84 in December. The index of expected conditions in the next six months held steady (+25.4% y/y) at 79. The index measuring traffic of prospective buyers rose 1.8% to 58 (31.8% y/y), an expansion high.

Regional readings were mixed this month. The index rose 5.1% (31.9% y/y) in the Northeast to 62. The index reading increased 4.9% (22.9% y/y) in the West to 86, an expansion high. In the South, the index held steady (+26.2% y/y) at the expansion high of 77. Declining 9.6% (+34.7% y/y) to 66 was the index for the Midwest.

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 Jan Dec Nov Jan Y/Y 2019 2018 2017
Composite Housing Market Index, SA (All Good=100) 75 76 71 29.3% 66 67 68
 Single-Family Sales: Present 81 84 77 26.6 72 73 74
 Single-Family Sales: Next Six Months 79 79 78 25.4 72 74 76
 Traffic of Prospective Buyers 58 57 54 31.8 49 50 50
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