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Economy in Brief

U.S. Home Builder Index Declines Further in June
by Tom Moeller  June 15, 2022

• Builder confidence falls for sixth consecutive month.

• Potential buyers' traffic falls sharply.

• Regional weakness is widespread.

In yet another indication of weakness in the housing market, the Composite Housing Market Index from the National Association of Home Builders-Wells Fargo fell 2.9% (-17.3% y/y) in June to 67 from 69 May. It was the lowest level since June 2020. The latest level compared to 68 expected in the INFORMA Global Markets survey.

The index measuring traffic of prospective buyers fell 9.4% (-32.4% y/y) to 48 from 53 in May. The index stood at the lowest level since June 2020. The current sales reading fell in June by 1.3% (-11.5% y/y) to 77 from 78 in May and stood at its lowest level also since June 2020. The index of expected sales in the next six months weakened 3.2% (-22.8% y/y) to 61 from 63 in May. The index peaked at 89 in November 2020.

Regional activity weakened in most sections of the country this month. The reading for the Northeast plunged 18.4% (-16.2% y/y) to 62. The index for the West declined 12.2% (-24.4% y/y) to 65. In the South, the index declined 1.3% (11.8% y/y) to 75. Moving higher by 5.9% (-22.9% y/y) was the index for the Midwest to 54. The 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.

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