US: Housing Market Index

Wed Apr 15 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Housing Market Index 55 53 to 57 56 53 52

Housing data are increasingly and convincingly pointing to spring strength. The housing market index is up 4 points to 56 in April vs a revised 52 in March. Strength is led by the expectations component, at 64, reflecting strong optimism among builders. Present sales are right behind at 61, up 3 points from March which hints at strength for this month's new home sales. Trailing, but trailing a little less distantly, is buyer traffic at 41. This component, held down by a lack of first-time buyers, hit a recent low of 37 last month.

Regional data show the South out in front at a composite score of 59, followed by the West at 56 and the Midwest at 55. The Northeast, which is by far the smallest region for new homes, lags far in the distance at 43.

The manufacturing sector, which is struggling, is being hurt by global demand, a source less important to housing which is getting its boost from low mortgage rates and strength in the labor market. As usual, the housing market index comes out ahead of housing starts which, in data to be posted tomorrow morning, are expected to rebound strongly from January's deep plunge.

Market Consensus Before Announcement
The NAHB housing market index showed the lack of first-time buyers as an increasing negative for the new home market, evident in the housing market index for March where growth slowed 2 points to an 8-month low of 53. The traffic component of the index again showed particular weakness, down 2 points to 37 which was a 9-month low and that directly reflected the lack of first-time buyers. The other 2 components of the report remained well over 50, at 58 for current sales, which however was down 3 points from February for a 5-month low, and at 59 for future sales which was unchanged.

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.