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Economy in Brief

U.S. Home Builder Sentiment Stabilizes at Depressed Level
by Tom Moeller  May 18, 2020

• Housing market remains notably weak.

• Few are looking to buy a home.

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo moved up to 37 during May (-43.9% y/y) after collapsing to 30 in April. It was 72 in March. The figure remained nearly the lowest level in eight years. A reading of 35 had been expected in the INFORMA Global Markets survey. The NAHB figures are seasonally adjusted. Over the past 15 years, there has been a 71% correlation between the y/y change in the home builders index and the y/y change in new plus existing home sales.

The index of present sales conditions improved to 42 (-41.7% y/y) in May after falling sharply to 36 from 79 in March. The index of expected conditions in the next six months rose to 46 (-36.1% y/y). It fell to 36 in April from 75 in March. The index measuring traffic of prospective buyers also rose m/m after collapsing in April.

Regional readings all remained depressed. The index for the Northeast fell 10.5% (-73.8% y/y) after dropping 70.3% in April. In each of the other regions, indices improved slightly m/m after falling sharply in April, although year-to-year comparisons were down. The index for the Midwest was off 42.9% y/y, while the West remained 39.7% lower y/y and the South was down 38.2% y/y.

The NAHB has compiled the Housing Market Index since 1985. It reflects survey questions which ask builders to rate sales and sales expectations as "good," "fair" or "poor" and traffic as "very high," "average" or "very low." The figures are diffusion indexes with values over 50 indicating a predominance of "good"/"very high" readings. In constructing the composite index, the weights assigned to the individual index components are: 0.5920 for single-family detached sales, present time, 0.1358 for single-family detached sales, next six months, and 0.2722 for traffic of prospective buyers. These data are included in Haver's SURVEYS database.

National Association of Home Builders May Apr Mar May Y/Y 2019 2018 2017
Composite Housing Market Index, SA (All Good=100) 37 30 72 -43.9% 66 67 68
 Single-Family Sales: Present 42 36 79 -41.7% 72 73 74
 Single-Family Sales: Next Six Months 46 36 75 -36.1% 72 74 76
 Traffic of Prospective Buyers 21 13 56 -57.1% 49 50 50
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