U.S. Home Builders Sentiment Strengthens in January as Mortgage Rates Fall
by:Tom Moeller
|in:Economy in Brief
Summary
- Increase extends prior month’s gain.
- Prospective buyer traffic is strong.
- Regional changes are mixed.
The Housing Market Index compiled by the National Association of Home Builders/Wells Fargo increased 18.9% in January (25.7% y/y) to 44 following an unrevised 8.8% December increase. These gains followed four consecutive months of decline. Despite the recent improvement, the index remained below its recent peak of 56 in July. Looking back, the index peaked at 90 in November 2020.
The average rate on a 30-year fixed rate mortgage fell to 6.66% last week from a high of 7.79% in the last week of October, according to Freddie Mac.
The NAHB reported that its single-family sales measure rose 17.1% (20.0% y/y) to 48 following a 2.5% December rise. These increases followed four straight months of decline. The reading of prospective sales in six months rose 26.7% (54.1% y/y) to 57, its highest level in six months. The traffic of prospective buyers index increased 20.8% (26.1% y/y) to 29 following a 14.3% increase. This reading remained below the November 2020 high of 77.
Regionally, there was improvement in all but one region of the country. In the West, the index rose 31.0% both m/m and y/y to 38 following a 3.6% December gain. The index was below its high of 54 six months earlier. The index for the South increased 25.6% both m/m and y/y to 49 after rising 11.4% during December. In the Northeast, the index rose 1.8% (64.7% y/y) to 56 following a 3.8% December rise. In the Midwest, the index held steady at 35 but rose 9.4% y/y. It remained below its high of 85 in November 2020.
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. The regional indexes run back to December 2004.
These data are included in Haver's SURVEYS 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.
More Economy in Brief
