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Today's Focus: NAHB HMI (Builder Confidence Survey)
This month, the NAHB’s HMI, which measures builder confidence, rose to 49, a gain of four points from May's print of 45 (which was not subject to any revision). For reference, last month's 45 print was the lowest reading in the last 12 months.
- Headline: Modest bounce but the Good/Bad delineation line is 50 – so less worse remains the more apt descriptor of the prevailing reality than ‘accelerating recovery’. The June reading of 49 marks the 5th consecutive month below 50
- Sub-indices: All three index components gained on the month with current sales leading gainers at +6 pts sequentially.
- Regional: West/South/Midwest all bounced MoM while the Northeast reversed two months of sequential gains. On a 3M rolling average basis (NAHB's preferred read) all regions ticked up moderately with the exception of the Midwest.
- The Homebuilder “Optimism Spread” (6M estimates less Current Traffic) remains near post recession peak levels.
Following four consecutive months of decline/stagnation, builder confidence finally caught a bounce in this most recent survey.
NAHB Chairman Kevin Kelly had this to say:
“After several months of little fluctuation, a four-point uptick in builder sentiment is a welcome sign and shows some renewed confidence in the industry. However, builders are facing strong headwinds, including the limited availability of labor.”
While NAHB's Chief Economist, David Crowe, added this:
“Consumers are still hesitant, and are waiting for clear signals of full-fledged economic recovery before making a home purchase. Builders are reacting accordingly, and are moving cautiously in adding inventory.”
From June 2013 through January 2014, the NAHB index was in clear recovery/improvement territory with readings of 51-58. While this morning's print is an improvement, it still falls well short of 2H13 levels and remains below the 50 line.
About the NAHB HMI:
The Housing Market Index (HMI) is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. The monthly survey has been conducted for 30 years. The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next 6 months as well as the traffic of prospective buyers of new homes. The HMI is a weighted average of separate diffusion indices for these three key single-family series. The HMI can range from 0 to 100, where a value over 50 implies conditions are, on average, improving, a value below 50 implies conditions are worsening, and an index value of 50 indicates that the housing market is neither improving nor worsening.
Joshua Steiner, CFA
Christian B. Drake