U.S. Home Builder Index Recovers

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo increased 2.9% (1.4% y/y) to 70 during May following an April decline to 68. The latest reading compared to expectations for 69 in the Informa Global Markets Survey. The NAHB figures are seasonally adjusted. During the last ten years, there has been a 65% correlation between the y/y change in the home builders index and the y/y change in housing starts.

The index of present sales conditions in the housing market increased 2.7% to 76 (1.3% y/y), but remained below its December high of 80. The index for conditions in the next six months held steady at 77 (1.3% y/y) and equaled the lowest level since November.

Home builders reported that the traffic of prospective buyers index was stable m/m at 51 and was unchanged y/y.

Amongst the regional indexes, the index for the Midwest increased 7.9% (4.6% y/y) to the highest level in three months. The index for the South eased 1.4% to the lowest level since October and was unchanged y/y. The reading for the West fell 1.3% (-6.3% y/y) and the index for the Northeast held steady, up 17.0%.

The NAHB has compiled the Housing Market Index since 1985. It reflects 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 six over 50 indicating a predominance of "good" readings. The weights assigned to the individual index components are .5920 for single-family detached sales, present time, .1358 for single-family detached sales, next months and .2722 for traffic of prospective buyers. The results are included in Haver's SURVEYS database. The expectations figure is available in Haver's MMSAMER database.