Momentum In The Housing Sector Remains Lethargic Reports Home Builders

The only momentum behind the housing market is its penchant for crawling along at a low level. The National Association of Home Builders reported that their index of housing market activity remained low at 13 which was just above the all time low of 8 reached early last year. Perhaps the latest reading languishes in the backwash of the expiration of the government's homebuyer tax credit, but time for that reasoning is running out. The Consensus expectation has been for an uptick in the September reading to 14.

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.

Month-to-month stability across the sub-series was pervasive. The index of single-family home sales held at its lowest level since June of last year. The index of sales during the next six months also held 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 weakness and remained at the lowest level since April of last year. The index for the Northeast and the Midwest fell to the lowest since April 2009. In the South the index rose slightly.

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, improved slightly during Q2 (the latest available figure) to 73.2%. That 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.) During July the median home price of $183,400 was up from the cycle low but still down 20% from the 2007 high. The mortgage interest rate was 4.90%, the lowest for this series which began in 1981.

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