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Economy in Brief

U.S. Housing Sector Improves Again This Month Says Home Builders Association
by Tom Moeller   November 16, 2010

The National Association of Home Builders reported that their index of housing market activity improved to 16 this month from a downwardly revised 15 in October. The figure remained above the all-time low reached in January of last year but it disappointed the Consensus expectation for a reading of 17.

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. During the last ten years there has been a 75% correlation between the y/y change in the index and new plus existing single family home sales.

The index of single-family home sales held steady at 16 and remained down from levels near 80 in 2004. The index of sales during the next six months improved to 25. Higher as well was the home builders' indication that the traffic of prospective buyers rose slightly. Each of these NAHB figures is seasonally adjusted. The Builders' index for the Midwest and Western regions of the country showed the greatest m/m improvement. The index for the South (unchanged) and the Northeast (down) were weak.

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, inched up in 2Q (the latest available figure) to 72.3%. That was 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 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.

National Association of Home Builders November October September Nov. '09 2009 2008 2007
Composite Housing Market Index (All Good=100) 16 15 13 17 15 16 27
 Single-Family Sales 16 16 13 17 13 16 27
 Single-Family Sales: Next Six Months 25  23 18 28 24 25 37
 Traffic of Prospective Buyers 12 11 9 13 13 14 21
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