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Economy in Brief

U.S. Home Builder Sentiment Collapses
by Tom Moeller  April 15, 2020

• Weakness in housing market is stark.

• Few people across regions are looking to buy.

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo plummeted 58.3% (-52.4% y/y) to 30 in April from 72 in March. It was the lowest level since June 2012. A reading of 55 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 declined 54.4% m/m to 36 (-47.8% y/y). The index of expected conditions in the next six months fell 52.0% m/m to 36 (-49.3% y/y). The index measuring traffic of prospective buyers collapsed by roughly three quarters both m/m and y/y to 13.

Regional readings were all weak. The index for the Northeast fell 70.3% to 19 (-65.5% y/y) and the index for the Midwest weakened 62.7% to 25 (-55.2% y/y). The index for the West declined 59.5% (-54.9% y/y). The index for the South declined 55.3% to 34 (-48.5% y/y).

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 Apr Mar Feb Apr Y/Y 2019 2018 2017
Composite Housing Market Index, SA (All Good=100) 30 72 74 -52.4% 66 67 68
 Single-Family Sales: Present 36 79 81 -47.8% 72 73 74
 Single-Family Sales: Next Six Months 36 75 79 -49.3% 72 74 76
 Traffic of Prospective Buyers 13 56 57 -72.3% 49 50 50
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