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Economy in Brief

U.S. Home Builder Sentiment Continues to Strengthen in July
by Tom Moeller  July 16, 2020

• Housing market activity is improving broadly.

• Number of prospective buyers revisits earlier highs.

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo moved up to 72 during July and added to its June strengthening to 58. Despite the increase, the index remained below the peak of 76 in December of last year. A reading of 60 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 measuring traffic of prospective buyers jumped m/m to 58, equaling January 2020, December 2017 and late-1990's highs. The index of present sales conditions improved to 79 in July after rising to 63 in June. The index of expected conditions in the next six months rose to 75 from 68.

Regional readings all improved. The index for the Northeast surged to 70 and and equaled the August 2005 high. The index for the Midwest rose to 88, a seven month high, while the West rose to 80 and nearly reached the February high. The index for the South improved to 73, the highest level since March.

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 Jul Jun May Jul'19 2019 2018 2017
Composite Housing Market Index, SA (All Good=100) 72 58 37 65 66 67 68
 Single-Family Sales: Present 79 63 42 71 72 73 74
 Single-Family Sales: Next Six Months 75 68 46 71 72 74 76
 Traffic of Prospective Buyers 58 43 21 48 49 50 50
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