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Economy in Brief

U.S. Home Builder Index Weakens in March
by Tom Moeller  March 16, 2021

• Housing market activity remains below November high.

• Weakness is broad-based regionally.

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo declined 2.4% (13.9% y/y) to 82 during March. It was the third decline in four months after the index reached a record of 90 in November. The March decline compared to expectations for a reading of 83 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.

Performance amongst the composite index's three components was mixed this month. The index of present sales conditions fell 3.3% to 87 in March after holding steady in February. The index remained 10.1% higher than one year ago. The index of expected sales six months rose 3.8% in February (+10.7% y/y) to 83, and reversed February's decline. The index measuring traffic of prospective buyers held steady (28.6% y/y) at 72 this month.

Regional index performance also varied in March. The index for the Northeast eased 1.1% (+34.4% y/y) after surging 27.9% in February. The index for the Midwest declined 3.7% (+16.4% y/y) in March following a 1.2% rise. The index for the South held steady (7.9% y/y) for the second straight month. The index for the West eased 3.3% (+11.4% y/y), the fourth consecutive monthly decline. These regional series begin in 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 Mar Feb Jan Mar '20 2020 2019 2018
Composite Housing Market Index, SA (All Good=100) 82 84 83 72 70 66 67
 Single-Family Sales: Present 87 90 90 79 76 72 73
 Single-Family Sales: Next Six Months 83 80 83 75 74 72 74
 Traffic of Prospective Buyers 72 72 68 56 56 49 50
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