US: Housing Market Index

Mon Sep 18 09:00:00 CDT 2017

Consensus Consensus Range Actual Previous Revised
Housing Market Index 66 53 to 68 64 68 67

Optimism is easing this month among the nation's home builders whose housing market index fell 3 points in September to 64, matching July as the weakest month of the year. Hurricane effects are not pronounced though the index for the South did fall 4 points to 65, yet the index for the Midwest shows the most weakness, down 6 points to 59. The West, which is a focused region for home builders, continues to lead the report, up 2 points to 79 while the Northeast continues to lag, up 1 point at 50.

Buyer traffic remains under breakeven 50, down 1 point at 47 reflecting lack of first time buyers who are being kept out of the new home market by high prices and lack of available properties. Six-month sales are down 4 points to 73 with current sales also down 4 points, to 70.

Today's report hints at weakness for tomorrow's housing starts & permits where another set of mixed results are the expectations. The housing market, now hit by the impacts of Hurricane Harvey and Hurricane Irma, looks to have a difficult time accelerating into year end.

Market Consensus Before Announcement
Hurricanes are expected to hit the housing market index which forecasters see falling 2 points to 66 with the low estimate all the way down at 53. Going into the September report, home builders had been unusually optimistic even as housing starts and permits, along with buyer traffic, have been lagging.

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, sales 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.