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Economy in Brief

U.S. Home Builder Index Extends Downward Trend
by Tom Moeller  August 15, 2022

• Builder confidence falls sharply from December peak.

• Component weakness is widespread.

• Regional weakness also is all-inclusive.

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo declined 10.9% during August (-34.7% y/y) to 49, the lowest level since May 2020. The index is down 45.6% from its November 1990 high of 90. A reading of 55 had been expected in the INFORMA Global Markets survey.

All three HMI components continued to decline this month. The index of present sales conditions fell 10.9% (-29.6% y/y) to 57, the seventh decline in eight months. It followed a 15.8% July decline. The level was 40.6% below the record-high 96 in November 2020. The index of expected sales over the next six months weakened 4.1% (-42.0% y/y) to 47, the seventh monthly decline this year. It stood at the lowest level since May 2020, off 47.2% from the November 2020 peak. The index measuring traffic of prospective buyers eased 13.5% (-45.8% y/y) to 32, the seventh m/m decline this year.

Each of the regional index readings weakened this month. The index for the Midwest fell 14.3% (-34.4% y/y) to 42 in August, down every month but two this year. The index for the Northeast declined 14.0% (-35.5% y/y) to 49, off 43.7% from the February 2021 peak. The index for the West was off 10.6% (-50.6% y/y), down 57.1% from the November 2020 peak. In the South, the index weakened 10.0% (-29.9% y/y) to 54, the seventh monthly slide this year. 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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