U.S. Home Builders' Index Jumps

Housing activity firmed in October according to the National Association of Home Builders/Wells Fargo report on housing market activity. The Composite Housing Market Index jumped four points to 18, its highest level since May of last year. The index of single-family home sales also rose four points to 18 but still remained down from levels near 70 in 2004. Even stronger, the index of sales during the next six months jumped seven points to 24, its highest since May, 2008. Finally, the home builders' index of traffic of prospective buyers picked up modestly m/m to 14. By region, the index for the West was strongest followed by gains in the Midwest and South. The Northeast's figure was unchanged. 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, slipped in Q2 to 72.6%. Nevertheless, it remained near the 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 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.