US: Housing Market Index

Mon Apr 18 09:00:00 CDT 2016

Consensus Consensus Range Actual Previous
Housing Market Index 59 58 to 60 58 58

The housing market index, unchanged for a third straight month at 58 in April, continues to signal solid confidence levels among home builders. Components are mixed with present sales continuing to lead the way though they did dip 2 points to 63. Right behind, in a very good sign, are expectations for 6-month sales which are up 1 point to 62. Still lagging is traffic, at 44 for a 1 point gain.

Regional composite data continue to show the West far out in front, unchanged at 67 and underscoring the importance of this region for the nation's new home sector. The South, which is the largest housing region, is unchanged at 59 with the Midwest close behind at 56. The Northeast, the smallest for new homes which reflects the region's full development, trails in the distance at 44.

The availability of jobs together with low mortgage rates are solid pluses for the new housing outlook. A negative, however, is low traffic, reflecting lack of participation by first-time buyers who continue, in what is perhaps a lingering effect from the 2008 housing collapse, to prefer to rent. Note that this report, due to an embargo break, was released this morning before the scheduled 10:00 a.m. ET posting time.

Market Consensus Before Announcement
A gain is expected for the housing market index which has been solid but not accelerating. Though both strong, current sales and future sales are being held back by limited construction capacity, including shortages in labor.

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.