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Economy in Brief

U.S. Home Builder Index Improves; Expectations Jump to 12-Year High
by Tom Moeller  May 15, 2017

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo increased 2.9% to 70 during May and reversed most of the prior month's decline. The index remained 20.7% higher y/y. The NAHB figures are seasonally adjusted. During the last ten years, there has been a 72% correlation between the y/y change in the home builders index and the y/y change in housing starts.

The home builders' forward looking indicator exhibited great strength this month. The index for conditions in the next six months improved 5.3% (21.5% y/y) to 79, the highest level since June 2005. The index of present conditions in the housing market also was firm and increased 2.7% to 76 (20.6% y/y).

Home builders reported that the traffic index eased another 1.9% m/m to 51, but remained 15.9% higher y/y.

Amongst the regional indexes, the index for the Northeast jumped 11.1% (38.9% y/y). The index for the West gained 3.9% (19.4% y/y), and the South's index increased 2.9% (20.0% y/y). In the Midwest, the index fell 3.0% (+8.3% y/y), down for the second straight month.

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 six 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 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 May Apr Mar May'16 2016; 2015 2014
Composite Housing Market Index, SA (All Good=100) 70 68 71 58 61 59 52
 Single-Family Sales: Present 76 74 77 63 67 64 56
 Single-Family Sales: Next Six Months 79 75 78 65 67 66 61
 Traffic of Prospective Buyers 51 52 53 44 45 43 39
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