US Macro Updates

Key takeaway: The slide in the NAHB Index continued for a 4th month in a row. The NAHB Index is based on a monthly survey of home builders and is designed to reflect the sentiment in the new homes market. This key index, after rising for most of 2023, has now fallen for 4 months in a row (from 56 in July to 50 in August to 45 in September to 40 in October and now to 34 in November). This is close to the lowest index level (in the recent cycle) of 31 recorded in Dec 2022. The bottomline is that after a surge in early 2023, new home sales activity seems to be cooling down significantly and home builder confidence is waning. Apart from the headline index, home builders assessment of sales over the next 6 months and buyer traffic also fell steeply in November. The downstream effect of a cooling home market on the construction sector and construction jobs is likely to add to the recessionary headwinds in the US economy

• The NAHB Index decreased to 34 (Oct was 40)

17th Oct 2023

Key takeaway: The slide in the NAHB Index continued for a 3rd month in a row. The NAHB Index is based on a monthly survey of home builders and is designed to reflect the sentiment in the new homes market. This key index, after rising for most of 2023, has now fallen for 3 months in a row (from 56 in July to 50 in August to 45 in September and finally 40 in October). This possibly indicates that the rise in the new home market seen in 2023 is now cooling off as interest rates remain stubbornly high and inflation reaccelerating over the past few months. Apart from the headline index, home builders assessment of sales over the next 6 months and buyer traffic also fell steeply in October. The downstream effect of a cooling home market on the construction sector and construction jobs is likely to add to the recessionary headwinds in the US economy

• The NAHB Index decreased to 40 (Sep was 44)

18th Sep 2023

Key takeaway: The NAHB Index is based on a monthly survey of home builders and is designed to reflect the sentiment in the new homes market. This key index, after rising for most of 2023, has now fallen for 2 months in a row (from 56 in July to 50 in August and now to 45 in September). This possibly indicates that the rise in the new home market seen in 2023 is now cooling off as interest rates remain stubbornly high and inflation reaccelerating over the past two months. Apart from the headline index, Home builders assessment of sales over the next 6 months and buyer traffic also fell steeply in September. The downstream effect of a cooling home market on the construction sector and construction jobs is likely to add to the recessionary headwinds in the US economy

• The NAHB Index decreased to 45 (Aug was 50)

15th Aug 2023

Key takeaway: The NAHB Index is a diffusion index. ie. A reading above 50 is taken to be expansionary or indicating a favorable outlook and a reading below 50 is taken to be contractionary or indicating a negative outlook. The NAHB Index had moved above the 50 mark in June (55) for the first time since July 2022. The Index then posted a small increase to 56 in August. In a key development, the NAHB Index moved back down substantially from 56 to 50. This breaks a 7 consecutive monthly increase trend. Everyone widely belives the US Residential Sector to have formed a bottom and New home sales have also been on a upswing. Hence any change in the home builders sentiment would be key in determining the direction of the US residential market.

• The NAHB Index decreased to 50 (Jul was 56)

19th Jul 2023

Key takeaway: The NAHB Index is a diffusion index. ie. A reading above 50 is taken to be expansionary or indicating a favorable outlook and a reading below 50 is taken to be contractionary or indicating a negative outlook. The NAHB Index moved above the 50 mark in June (55) for the first time since July 2022. The Index posted a small increase to 56 in its latest print today for July. However, the more important point to note is that this is the 7th consecutive monthly increase. The US Residential Sector is widely being called as having formed a bottom and New home sales have been on a upswing. The question really is – how long does this last? There have been some indications of a slowdown in the multi family housing construction space (which had been performing much better than the single family home market). However, activity seems to be picking back up again in the Single Family segment.

• The NAHB Index increased to 56 (June was 55)

19th Jun 2023

Key takeaway: The NAHB Index is a diffusion index. ie. A reading above 50 is taken to be expansionary or indicating a favorable outlook and a reading below 50 is taken to be contractionary or indicating a negative outlook. The NAHB Index moved above the 50 mark (55 for the month of June) for the first time since July 2022. However, the more important point to note is that this is the 6th consecutive monthly increase. The US Residential Sector is widely being called as having formed a bottom and New home sales have been on a upswing. The question really is – how long does this last? There have been some indications of a slowdown in the multi family housing construction space (which had been performing much better than the single family home market). 

• The NAHB Index increased to 55 (May was 50)

16th May 2023

Key takeaway: Who would have thought at the end of 2022 with US Residential Real Estate in free fall, we would be looking at the NAHB/ Wells Fargo Housing Market Index back at 50.0 – the same level of July 2022 and 5 continuous months of sentiment index increases in 2023?! The story continues. Lack of inventory from fleeting sellers in the Existing Homes market is driving buyers and consequently momentum in the New Home Sales market. New Home prices continue to rise month over month. While that is typical from a seasonal perspective (spring home purchase season), it is key to note that it becomes harder to put a disinflationary spin to the overall price level in the economy when home prices continue to be on the upswing. The latest print of 50 is also significantly above consensus expectations of 45! It is little surprise that stocks of home builder companies and ETFs are not too far from their all time highs reached in 2022. 

• The NAHB Index increased to 50 (April was 45)

17th Apr 2023

Key takeaway: The story continues.. In yet another sign of stabilization in the US housing market, the NAHB Index – a gauge of home builder confidence – increased more than expectations. The index was expected to print 44 and the latest read came in at 45. Just for context – last years low was 31 in Dec 2022. Limited resale inventory in the US residential market has resulted in more activity in the new construction / new home sales market. Even with mortgage rates much higher compared to a year ago, buyer demand has stayed relatively resilient. It is little surprise that stocks of home builder companies and ETFs are not too far from their all time highs reached in 2022. 

• The NAHB Index increased to 45 (March was 44)

15th Mar 2023

Key takeaway: The latest reading of the NAHB Index for March once again reiterates a stabilizing US residential market. The Index has grown for the past 3 consecutive months from a low of 31 in Dec 2022 to a reading of 44 in March. This is still significantly below 2020/2021 high of 90. But it emphasizes that the current downturn in the US housing market has hit a pause if not a bottom. Even though high construction costs, high mortgage rates and lower housing affordability have been major headwinds for the US housing market, home builders have been cautiously optimistic since the start of 2023 that the worst of the housing downturn is over.

• The NAHB Index increased to 44 (Feb was 42).