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Economy in Brief

U.S. Home Builder Index in Marked Downtrend
by Carol Stone, CBE  October 18, 2022

•Present & expected sales decline

•Traffic of prospective buyers weakens

•Housing market conditions actually edge upward in the Northeast

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo fell 8 points or 17.4% m/m in the October survey (-52.5% y/y) to 38, yet again the lowest level since May 2020. The index is down 57.8% from its November 2020 high of 90. A reading of 44 had been expected in the Informa Global Markets survey.

All three HMI components declined again this month. The index of present sales conditions fell f points or 16.7% (-47.7% y/y) to 45, the ninth decline in ten months. The October level was 53.1% below the record-high of 96 in November 2020. The index of expected sales over the next six months dropped 23.9% in October to 35 (-58.3% y/y), down for a sixth consecutive month. The October value is the lowest level since June 2012. The index measuring traffic of prospective buyers fell 19.4% (-61.5% y/y) to 25, the seventh consecutive monthly decline.

Among the regions of the country, the Housing Market Index actually rose in Northeast to 48 this month from 47 in September, a 2.1% increase (-34.2% y/y). The other regions all declined, with the largest reduction in the West, -26.5% in the month from 34 to 25 (-70.6% y/y). The index in the South was 41, down 21.2% in the month and 51.2% from a year ago. In the Midwest, the index was 38 in October, down 9.5% in the month and 47.2% in the year.

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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