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Economy in Brief

U.S. Home Builder Index Strengthened in October
by Kathleen Stephansen, CBE  October 18, 2021

• Strong gain in October brings the index back to the July level.

• All three components rose this month.

• Performance was brisk in all four regions of the country.

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo rose 5.3% m/m in October (-5.9% y/y) to 80, following a rise of 1.3% m/m (-8.4% y/y) to 76 in September. An unchanged level of 76 was expected in the INFORMA Global Markets survey. The seasonally-adjusted index was 11.1% below the record high reached in November 2020.

All three HMI components gained this month. The index of present sales conditions rose 6.1% m/m (-3.3% y/y) to 87 in October, after the 1.2% (-6.8% y/y) rise to 82 in September. The index measuring traffic of prospective buyers increased 6.6% m/m (-12.2% y/y) to 65 this month, following a 3.4% rise (-17.6% y/y) to 61 in September, the second monthly gain in five months, after reaching a low of 59 in August. The index is still 15.6% below the cycle high of 77 in November 2020. The index of expected sales over the next six months rose 3.7% m/m (-4.5% y/y) to 84 in October, up from 81 (-4.7% y/y) in September.

Performance was brisk in all four regions of the country. The strongest gain was in the Northeast, where the index rose 9.0% m/m (-16.0% y/y) to 73 in October after an 11.8% m/m (-17.3% y/y) decline in September to 67. The index for the West rose 6.3% m/m (-10.5% y/y) to 85 this month, following a decline of 5.9% m/m (-9.1% y/y) last month. The Midwest posted a rise of 5.8% m/m (-3.9% y/y) to 73, after a 7.8% m/m rise (-11.5% y/y) to 69 in September. The South posted a rise of 5.0% m/m (+1.2% y/y) to 84, after a rise of 3.9% m/m (-5.9% y/y) to 80 in September. 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. The Informa Global Markets survey is in Haver's MMSAMER database.

National Association of Home Builders Oct Sep Aug Oct '20 2020 2019 2018
Composite Housing Market Index, SA (All Good=100) 80 76 75 85 70 66 67
 Single-Family Sales: Present 87 82 81 90 76 72 73
 Single-Family Sales: Next Six Months 84 81 81 88 74 72 74
 Traffic of Prospective Buyers 65 61 59 74 56 49 50
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