U.S. Home Builders' Index Slips

According to the National Association of Home Builders, the recent improvement in the housing market took this month off. Their June index of sales slipped to 15 from the unrevised May level of 16. Nevertheless, the index remained near the highest level since last September. The index is compiled from survey questions asking builders to rate market conditions as “good”, “fair”, “poor” or “very high” to “very low”. Numerical results over 50 indicate a predominance of “good” readings.

During the first quarter 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, jumped m/m to 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 Home Builders Association indicated that its sub-index of present sales remained stable at a reading of 14 but that also was up significantly from the low of last year. Since 1990, the year-to-year change in this index has had an 80% correlation with the year-to-year percentage change in new single-family home sales.

The index of builders’ expectations for home sales in six months also slipped but remained near its highest since September. The “traffic" of prospective buyers was unchanged from May and still up from the record lows of this past Winter.

During June the index readings for each of the county's regions improved except in the South.

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.