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Economy in Brief

U.S. Home Builders Index Declines in June
by Tom Moeller  June 15, 2021

• Activity is off its November high.

• Softening is evident across all regions.

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo declined this month to 81 from 83 in the prior two months. Stability was expected m/m in the INFORMA Global Markets survey. The seasonally-adjusted index reached a record of 90 last November. Over the past 15 years, there has been a 68% 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 negative this month. The index of present sales conditions fell to 86, the lowest level since last August. Expected sales over the next six months fell to 79, the lowest level also since August. The index measuring traffic of prospective buyers slipped m/m to 71 and remained down from the cycle high of 77 in November.

Each regional index reading fell this month. The index for the Northeast fell 6.4%, down for the fourth straight month. The index for the West dropped 5.5% and was 12.2% below the November high. The index for the Midwest declined 1.4% m/m to the lowest level since July. The index for the South weakened 1.2% but remained at the highest level in six months. 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 Jun May Apr Jun '20 2020 2019 2018
Composite Housing Market Index, SA (All Good=100) 81 83 83 58 70 66 67
 Single-Family Sales: Present 86 88 88 63 76 72 73
 Single-Family Sales: Next Six Months 79 81 80 68 74 72 74
 Traffic of Prospective Buyers 71 73 74 43 56 49 50
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