Forward Momentum In The Housing Sector Is Lost Says Home Builders Association

It had been a weak housing market recovery anyway, but the National Association of Home Builders reported that their index of housing market activity fell back this month to 14, the lowest level since March 2009. Perhaps this is the backwash from the expiration of the government's homebuyer tax credit. Even so, the Association's index remained up from the low of 8 hit in January 2009. Stability in July at an index level of 16 was the Consensus expectation.

The Home Builders index is compiled from survey questions asking builders to rate market conditions as "good", "fair", "poor" or "very high" to "very low".The figure is thus a diffusion index with numerical results over 50 indicating a predominance of "good" readings. During the last ten years there has been a 75% correlation between the y/y change in the index and new plus existing single family home sales.

At 15, the index of single-family home sales fell to its lowest level since June of last year. The index of sales during the next six months also fell to 21, its lowest since March 2009. Diminished as well was the home builders' read that the traffic of prospective buyers fell to its lowest since March of last year. Each of these NAHB figures is seasonally adjusted.

The Builders' index for the West showed the greatest m/m decline to the lowest level since April of last year. The index for the South also fell to the lowest since March 2009. In the Northeast and in the Midwest the indexes improved modestly.

The Home Builders' Housing Opportunity Index, which is the share of homes sold that could be considered affordable to a family earning the median income, slipped during 1Q (the latest available figure) to 72.2%. hat was near the record high, buoyed by lower home prices, lower interest rates and higher income. (There is a break in the series from 2002 to 2003.)

The NAHB has compiled the Housing Market Index since 1985. The weights assigned to the individual index components are .5920 for single family detached sales, present  time, .1358 for single family detached sales, next six months; and .2722 for traffic of prospective buyers. The results, along with other housing and remodeling indexes from NAHB Economics, are included in Haver's SURVEYS database.

The 2008 HMDA Data: The Mortgage Market during a Turbulent Year from the Federal Reserve Board is available here