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Economy in Brief

U.S. Home Builder Index Falls in September
by Tom Moeller  September 19, 2022

• Builder confidence continues to decline from December peak.

• Present & expected sales plus traffic fall further.

• Weakness is most pronounced in the West.

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo declined 6.1% during September (-39.5% y/y) to 46, remaining the lowest level since May 2020. The index is down 48.9% from its November 2020 high of 90. A reading of 48 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 5.3% (-34.1% y/y) to 54, the eighth decline in nine months. It followed two months of double-digit decline. The level was 43.8% below the record-high of 96 in November 2020. The index of expected sales over the next six months weakened 2.1% (-43.2% y/y) to 46, down for the fifth consecutive month. It stood at the lowest level since May 2020. The index measuring traffic of prospective buyers weakened 3.1% (-49.2% y/y) to 31, the sixth consecutive monthly decline this year.

Movement amongst the regional index readings was mixed this month. The index for the West weakened 19.0% (-57.5% y/y) to 34, the lowest level since April 2020. It was the fifth straight month of double-digit decline. In the South, the index weakened 5.5% (-35.0% y/y), off for the fifth straight month. The index for the Midwest held steady (-39.1% y/y) at 42 in September after falling sharply in both of the prior two months. The index for the Northeast also held steady (-28.4% y/y) at 48.0, its lowest level since June 2020. 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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