U.S. Home Builders Index Is Stable

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo held at 58 during May for the fourth straight month. It remained down from the October high of 65. The NAHB figures are seasonally adjusted. During the last ten years, there has been an 81% correlation between the y/y change in the home builders index and the y/y change in single-family housing starts.

The index of single-family home sales held steady at 63 (+8.6% y/y), its lowest point since May. The index of expected sales during the next six months improved to 65 (3.2% y/y) from 62, the highest level since December. The index remained down, however, from its high of 75, six months ago.

Home builders reported that their traffic index held steady at 44 (12.8% y/y) for a second month, up from the low of 39 three months ago.

Movement in the Composite Index reflected sharp divergence in the regional measures. In the Midwest, the index of activity rebounded in May (20.4% y/y) to where it's been earlier this year. The index for the South returned to a four month high (1.7% y/y). The reading for the Northeast dropped sharply (-14.3% y/y) to the lowest level in nearly two years. The index for the West held steady (19.6% y/y) for a third month, but remained down sharply from the November 2015 high.

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 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 six 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.