April 17, 2017 Reading Time: 2 minutes

The National Association of Home Builders released its April survey of home builders this morning. The survey is designed to take the pulse of the single-family housing market. The survey asks home builders to rate market conditions for three specific topics: the sale of new homes, expected sales in the next six months, and the number of prospective buyers in the market for a new home. Scores for each component are then used to calculate an index that represents the percentage of survey respondents with a favorable view. So any number over 50 indicates that more builders view conditions as good than bad. The greater the number, the greater the percentage of builders with a favorable view. The Housing Market Index is a weighted average of the three component indexes.

For April, the HMI ticked down to 68 from 71 in March. Though the index fell slightly in April, it has been above 50 for 34 consecutive months. The index has averaged 68 for the first four months of 2017, the best start to a calendar year since 2005.

Among the component indexes, the index for new-home sales fell to 74 in April from 77 in March. This component has been above 70 for five consecutive months, the best five-month stretch since 2005. This means that over the past five months, more than 70 percent of builders have had a favorable view of new home sales.

The index of expectations of sales six months from now fell to 75 from 78 last month. Like the index for current new home sales, the index for expected sales over the next six months has been above 70 for five consecutive months.

The third component, number of prospective buyers, is the weakest component, coming in at 52 in the latest month, down from 53 in March. Though this is the weakest component, it shows that more than half of home builders surveyed rate the volume of prospective home buyers as “high to very high.”

On a regional basis, the West had the highest HMI, coming in at 77 in April, unchanged from March. The West has had readings above 70 for eight consecutive months. The next-best performing region was the South, with an index of 70, down 1 point from March. The Midwest HMI index posted a 5-point decline to 67 in April, while the Northeast dropped below 50, to 45 in April from 53 in March.

AIER’s April Business Conditions Monthly discusses the outlook for housing this spring, suggesting that economic fundamentals support a healthy housing market. Today’s data add further support to that conclusion.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.

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