US: Housing Market Index

Wed Sep 16 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous
Housing Market Index 61 59 to 63 62 61

Optimism among the nation's home builders continues to build. The housing market index is up another point this month to 62 vs 61 in August. Recent readings have been 10 year highs. The best news in the report comes from the weakest component, traffic which is up 2 points to 47. This suggests that high rental prices may be pushing potential first-time buyers into the market.

The index's other two components remain unusually strong, at 67 for current sales and a 1 point gain and 68 for future sales which is down 2 points. Three of the report's four regions show plus-60 composite scores led by what is by far the largest region, the South at 66.

Supply of new homes is low as are interest rates and traffic is better, all important factors that are lifting confidence. Housing starts & permits data, which have been volatile but unmistakably strong, will be posted tomorrow morning.

Market Consensus Before Announcement
The housing market index, a measure of home builder sentiment, has been very strong this year, reflecting low supply in the new housing market. Forecasters see the index holding at 61 in September. Expectations of future sales have been the leading component in this report.

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.