U.S. Home Builder Index Extends Downward Trend
by:Tom Moeller
|in:Economy in Brief
Summary
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Builder confidence falls sharply from December peak.
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Component weakness is widespread.
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Regional weakness also is all-inclusive.
The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo declined 10.9% during August (-34.7% y/y) to 49, the lowest level since May 2020. The index is down 45.6% from its November 1990 high of 90. A reading of 55 had been expected in the INFORMA Global Markets survey.
All three HMI components continued to decline this month. The index of present sales conditions fell 10.9% (-29.6% y/y) to 57, the seventh decline in eight months. It followed a 15.8% July decline. The level was 40.6% below the record-high 96 in November 2020. The index of expected sales over the next six months weakened 4.1% (-42.0% y/y) to 47, the seventh monthly decline this year. It stood at the lowest level since May 2020, off 47.2% from the November 2020 peak. The index measuring traffic of prospective buyers eased 13.5% (-45.8% y/y) to 32, the seventh m/m decline this year.
Each of the regional index readings weakened this month. The index for the Midwest fell 14.3% (-34.4% y/y) to 42 in August, down every month but two this year. The index for the Northeast declined 14.0% (-35.5% y/y) to 49, off 43.7% from the February 2021 peak. The index for the West was off 10.6% (-50.6% y/y), down 57.1% from the November 2020 peak. In the South, the index weakened 10.0% (-29.9% y/y) to 54, the seventh monthly slide this year. The regional series begin in December 2004.
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. The Informa Global Markets survey is in Haver's MMSAMER database.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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