U.S. Home Builders Association Index Remains Low

Spring has done nothing to lift activity in the housing market. The National Association of Home Builders reported that its April index of housing market activity slipped back to 16 from an unrevised 17 in March. Though the latest figure remained above the all-time low of 8 reached in January of 2009, monthly readings have varied in a range between 13 and 22 since the economic recovery began. The figure fell short Consensus expectations for 17. During the last ten years there has been a 66% correlation between the y/y change in the index and the change in new home sales.

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 80% correlation between the y/y change in the index and the change in new plus existing single family home sales.

The index of single-family home sales slipped to 16 and remained down from levels near 80 in 2004. The index of sales during the next six months also slipped to 23 and stayed in its recent range. The home builders' index of traffic of prospective buyers ticked up to 13. Each of these NAHB figures is seasonally adjusted. Upticks in the builders' index for the South and West were offset by flat or down readings elsewhere. Traffic held roughly steady for the sixth straight month.

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 in Q4 to 73.9%, a 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 expectation figure is available in Haver's MMSAMER database.