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Economy in Brief

U.S. Home Builder Sentiment Unexpectedly Surges to Record High in August
by Tom Moeller  August 17, 2020

• Housing market activity continues to strengthen.

• Number of prospective buyers posts a new record.

• Strength is broad-based regionally.

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo increased to a record 78 during August from 72 in July. A reading of 74 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 rose to 84 in August and nearly matched its record high of 86 reached in December 1998. The index of expected conditions in the next six months rose to 78, a sixth-month high. The index measuring traffic of prospective buyers jumped m/m to a record 65.

Regional readings all improved. The index for the Northeast surged to 77, up from 17 in May. The index for the West rose to 88, nearly a record high. The index for the South improved to 79 and matched the February record. The index for the Midwest was little-changed at 70, up from 25 in April. These regional readings date back only to December 2004.

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 Aug Jul Jun Aug'19 2019 2018 2017
Composite Housing Market Index, SA (All Good=100) 78 72 58 67 66 67 68
 Single-Family Sales: Present 84 78 63 73 72 73 74
 Single-Family Sales: Next Six Months 78 75 68 71 72 74 76
 Traffic of Prospective Buyers 65 57 43 50 49 50 50
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