U.S. Home Builder Sentiment Remains Improved

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo held steady at 62 during March after increasing to that level in February. The index remained up from the December low of 56, but below the expansion high of 74 reached in December of 2017. Expectations had been for an increase to 63 in the Informa Global Markets Survey. The NAHB figures are seasonally adjusted. During the last ten years, there has been a 57% correlation between the y/y change in the home builders index and the y/y change in new plus existing home sales.

The performance of the three index components is mixed this month. The index of present sales conditions rose to 68, its highest level since October. The level of the index remained down, however, from its peak of 80 in December 2017. The index of expected conditions in the next six months improved to 71, also the highest level in five months. The recent peak in this index was 80 in February of last year.

Despite these gains, the index measuring traffic of prospective buyers declined to 44 from 48 in February and remained below the peak of 58 reached in December 2017.

The rise in the overall March index reflected mixed patterns amongst regions of the country. In the South, the index rose to 70, its highest level in five months. For the Northeast, the reading surged to 52 from its low of 36 in December. The index for the West improved slightly to 69, but has been moving sideways for several months. Working lower was the reading for the Midwest. Its fall to 49 matched its lowest level since May 2015.

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 0.5920 for single-family detached sales, present time, 0.1358 for single-family detached sales, next months and 0.2722 for traffic of prospective buyers. The results are included in Haver's SURVEYS database. The expectations figure is available in Haver's MMSAMER database.