U.S. Home Builders Index Retreats; Traffic Surges

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo declined 4.6% to 62 during November after rising 6.6% to 65 in October, revised from 64. The figure fell short of expectations for 64 in the Informa Global Markets Survey. The NAHB figures are seasonally adjusted. During the last ten years, there has been an 80% 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 fell 4.3% (+8.1% y/y) to 67. Similarly, the index of expected sales during the next six months declined 6.7% (+6.1% y/y) to 70.

Despite the sales declines, home builders reported that their traffic index increased 2.1% to 48, the highest level since October 2005.

The housing market index decline reflected varying results this month around the country. In the South, the homebuilders index declined 7.5% (0.0% y/y) and for the Midwest it eased 1.7% (+5.2% y/y) for a second straight month. In the West, the index gained 1.3% (28.3% y/y) but in the Northeast it remained unchanged (2.0% y/y).

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.