US: Housing Market Index

Mon Jun 15 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous
Housing Market Index 56 55 to 57 59 54

The new home market is perhaps becoming the economy's leading sector, underscored by the recent jump in new home sales and the surge in starts & permits and now by a major 5-point spike in the housing market index to 59 for June which is well outside Econoday's high-end forecast. This matches last September as the strongest reading of the recovery.

Future sales lead the report with the component jumping 6 points to 69 followed by present sales at 65 for a 7 point gain. Traffic continues to lag but, at 44, is up 5 points in the month. Weakness in traffic reflects lack of first-time buyers in the market though the improvement here is a major plus in the June report.

The South, in both the latest report and in trend, is the strongest growth region for new homes and is also by far the largest region. The West is second in strength followed by the Midwest. The Northeast, which is the smallest new home region, remains in contraction.

Rising interest rates don't seem to be slowing the new home market which is getting a boost from strength in the jobs market. Housing starts & permits absolutely surged in April with the May report to be posted tomorrow morning.

Market Consensus Before Announcement
Credit has to be given to the NAHB housing market index which month after month has been signaling strength in the new home market that never materialized that is, not until recently. Another solid mid-50s reading could build expectations for a second-half stretch run for new home sales and new home construction.

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.