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Economy in Brief

U.S. Home Builders Index Treads Water
by Tom Moeller  January 19, 2016

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo held steady during January at 60 after falling 7.7% during the prior two months. It matched the level reached last June and has moved in a narrow range since. The figure fell short of expectations for 61 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 increased 3.1% (8.1% y/y) to 67 and recovered December's decline. Offsetting this rise, however, was a decline in the index of expected sales during the next six months. It fell 4.5% to 63, but still was 5.0% higher than one year ago.

Home builders reported that their traffic index fell 4.3% to 44. That repeated the prior month's decline and left it at the lowest level in six months.

The housing market index decline reflected an easing throughout most of the country. In the Northeast the index fell 4.1% (+9.3% y/y), down for the third straight month. In the West, the index fell 2.7% (+12.3% y/y) to the lowest level since September. In the South, the index was off 1.6% (+7.1% y/y), repeating its December performance; but in the Midwest the index rose 7.4% (-1.7% y/y), having moved sideways since mid-2014.

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.

National Association of Home Builders Jan Dec Nov Jan'15 2015 2014 2013
Composite Housing Market Index, SA (All Good=100) 60 60 62 57 59 52 51
 Single-Family Sales: Present 67 65 67 62 64 56 55
 Single-Family Sales: Next Six Months 63 66 69 60 66 61 58
 Traffic of Prospective Buyers 44 46 48 44 43 39 39
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