U.S. Home Builders' Index Again At Five-year High

The National Association of Home Builders/Wells Fargo reported that housing market activity this month reached a new height. The Composite Housing Market Index for May rose five points to 29, its highest level in four years. The index of single-family home sales rose five points to 30, also the highest since 2007 but still down from levels near 70 in 2004. The index of sales during the next six months rose three points to 34, its highest since 2007. Finally, the home builders' index of traffic of prospective buyers rose m/m to a high of 23. By region, the Northeast index posted the strongest gain to 32, its highest in nearly two years. The Midwest followed with a five point gain but it still was below February. The South gained five points as it moved sideways this year while the index for the West fell for the third straight month. Each of these NAHB figures is seasonally adjusted.

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 in Q4 to a record 75.9%, buoyed by lower home prices, lower interest rates and higher income. (There is a break in the series from 2002 to 2003.)

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.

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.