Home Builders' Survey Shows Tentative Signs of Stabilization

The National Association of Home Builders reported a stable performance in its Housing Market Index (HMI) for August, albeit at the index’s all-time low of 16, first seen in July. It stood at 22 this time last year and averaged 19 for the first six months of 2008. The index is compiled from survey questions asking builders to rate market conditions as “good”, “fair” or “poor” or “very high” to “very low”. Numerical equivalent results over 50 indicate a predominance of “good” readings.

Since 1990, the year-to-year change in this index has had a correlation of 72% with the year-to-year percentage change in new single-family home sales (see graph). One wonders, then, if the relative improvement in the HMI might be a precursor to an outright improvement in home sales.

In this regard, the Home Builders Association press release highlights the gains in two of the HMI components. Present sales conditions ticked up from 15 in July to 16 this month and builders’ expectations for six months out moved from 23 to 25. The most tangible measure, the “traffic of prospective buyers” held steady at its all-time low of 12. By region, two parts of the country showed increases, the Northeast and the Midwest. The South was steady and conditions in the West continued to erode. These readings ranged from 11 to 20.

The NAHB has compiled the Housing Market Index since 1985. The results, along with other housing and remodeling indexes from NAHB Economics, are included in Haver’s SURVEYS database.

The average asking price for a house coming onto the market in the U.K. declined 4.8% in August from a year ago after a 2.0% year-to-year decline in July. These were the first two declines in the series which was first begun in 2002.

Rightmove's house price index differs from the usual indexes of house prices that measure the price of an average house as in the Nationwide Buildings Societies' survey or the average of house prices as in the Halifax Bank of Scotland's survey. Rightmove compiles the asking prices of properties coming to market through Rightmove Company's 11.500 estate agency branches. The Rightmove index is based on the price a seller initially asks for his property, not what he eventually gets for it.

The year-to-year changes in the three indexes are shown in the accompanying chart. The year-to-year declines in actual prices of houses have occurred before, and have been deeper than, the year-to-year changes in the Rightmove index. The recent year-to-year declines in the Rightmove index suggest that the actual declines in house prices have at last begun to affect sellers' appraisals of their properties.