|Housing Market Index||58||56 to 60||55||57|
Home builders remain confident about growth for new home sales, at a February index of 55 vs 57 in January. The index has averaged 56 since first turning into the plus column in July last year. But a negative in the report is a further drop in the buyer traffic component, down 5 points to 39 for the lowest reading since July. Low traffic reflects lack of first-time buyers in the market, specifically young households.
The expectations component, which tracks future sales, was unchanged at 60 with present sales down only 1 point to 61, both strong readings. By region, overall confidence in the West is the highest, up 1 point to 64, followed by the largest region for new home sales, the South which is steady at 56. Looking at the two smallest regions for home sales, confidence in the Midwest fell a steep 10 points to 49 with the Northeast up 5 points to 48.
After a run of deep pessimism that bottomed in 2010 and 2011, builders have been growing in confidence, confidence that has yet however to pan out in actual acceleration for sales which have been flat. In separate data that reflect this optimism, builders see strong acceleration in new home sales this year to 572,000 from last year's 435,000. For 2016, they see a great surge to 807,000.
Market Consensus Before Announcement
The NAHB housing market index continued to report solid conditions with the housing market index at 57 in January versus an upwardly revised 58 in December. January was the 7th plus-50 score in a row. January's strength was led by the most heavily weighted component, present sales, which held steady at 62. But the second most heavily weighted component, traffic, remained weak, down 2 points to 44 and reflecting a significant lack of first-time buyers in the new home market. The final component, future sales, did fall 4 points but remained very solid at 60.
The National Association of Home Builders produces a housing market index based on a survey in which respondents from this organization are asked to rate the general economy and housing market conditions. The housing market index is a weighted average of separate diffusion indexes: present sales of new homes, sale of new homes expected in the next six months, and traffic of prospective buyers in new homes.
This report provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as the housing market index, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Whether the housing market index reflects new home sales or home resales, once a home is sold, it generates revenues for the realtor and the builder. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items home buyers might purchase. The economic "ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, home sales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the existing home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.
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