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Economy in Brief

U.S. Home Builder Index Strengthens
by Tom Moeller  December 18, 2017

The housing market remains in good shape. The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo increased 7.2% to 74 during December, the highest level since July 1999, up 7.2% y/y. Expectations had been for a rise to 70. For all of this year, the index increased 11.2% following last year's 3.8% rise. The NAHB figures are seasonally adjusted. During the last ten years, there has been a 67% correlation between the y/y change in the home builders index and the y/y change in housing starts.

The index of present sales conditions in the housing market rose 5.2% to 81 (8.0% y/y), also the highest level since 1999. The index for conditions in the next six months improved 3.9% (1.3% y/y) to 79.

Home builders reported that the traffic of prospective buyers index jumped to the highest level since December 1998, up 11.5% y/y.

Amongst the regional indexes, the index for the Midwest surged 16.9% (15.2% y/y) while the index for the West rose 10.4% (-1.2% y/y). For the South, the index improved 4.2% (7.1% y/y), but the index for the Northeast declined 13.1% (-7.0% 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 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 Dec Nov Oct Dec Y/Y 2017 2016 2015
Composite Housing Market Index, SA (All Good=100) 74 69 68 7.2% 68 61 59
 Single-Family Sales: Present 81 77 75 8.0 74 67 64
 Single-Family Sales: Next Six Months 79 76 78 1.3 76 67 66
 Traffic of Prospective Buyers 58 50 48 52 50 45 43
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