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Economy in Brief

U.S. Home Builder Index Surges
by Tom Moeller  June 16, 2020

• Housing market continues to recover.

• Rebound leaves activity below December's peak.

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo moved up to 58 during June and added to its May rise to 37. Despite these increase, the index remained below the peak of 76 in December of last year. A reading of 45 had been expected in the INFORMA Global Markets survey. The NAHB figures are seasonally adjusted. Over the past 15 years, there has been a 71% 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 improved to 63 in June after rising to 42 in May. The index of expected conditions in the next six months rose to 68 from 46. The index measuring traffic of prospective buyers also rose m/m after surging in May.

Regional readings all improved. The index for the Northeast increased to 48 after dropping to 17 in May. The index for the Midwest rose to 51 from 32, while the West rose to 66 from 44. The index for the South improved to 62 from 42.

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 Jun May Apr Jun'19 2019 2018 2017
Composite Housing Market Index, SA (All Good=100) 58 37 30 64 66 67 68
 Single-Family Sales: Present 63 42 36 71 72 73 74
 Single-Family Sales: Next Six Months 68 46 36 70 72 74 76
 Traffic of Prospective Buyers 43 21 13 47 49 50 50
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