Are we on the verge of a construction slowdown?

“There are many aspects at play that are contributing to what some are calling a housing recession,” he said. GPA. “Most of the causes are due to inflation; mortgage rates have skyrocketed this year, building material prices are still high, and we’ve seen a 54.7% increase in new home prices since the start of 2019.” added: “The housing market index, produced by the NAHB [National Association of Home Builders], hit a yearly low of 49 in August on its 100-point confidence scale for builders. This is down from 83 in January of this year. It’s a huge indicator of what homebuilders themselves feel about the current state of construction and the trajectory it’s taking this year.

Read more: Five Signs of Construction Company Health Explained

The NAHB/Wells Fargo (HMI) Housing Market Index is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market according to the association’s website. The survey asks respondents to rate market conditions for new home sales now and in the next six months, as well as traffic from potential new home buyers.

A rather sophisticated measure, the HMI is a weighted average of three separate component indices: current single-family sales, single-family sales for the next six months, and potential buyer traffic. Each month, a panel of builders rates the top two on a scale of “good”, “fair” or “poor” and the last on a scale of “high to very high”, “average” or “poor to very poor”. . An index is calculated for each series by applying the formula “(good – bad + 100)/2” or, for traffic, “(high/very high – low/very low + 100)/2”. Each resulting index is first seasonally adjusted and then weighted to produce the HMI. The weights are 0.5920 for current sales, 0.1358 for sales in the next six months, and 0.2722 for traffic. The weights were chosen to maximize the correlation with housing starts over the following six months.

The HMI can be between 0 and 100.

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