US: Housing Market Index

Tue Oct 17 09:00:00 CDT 2017

Consensus Consensus Range Actual Previous
Housing Market Index 64 63 to 66 68 64

Optimism among home builders, which has been easing slightly from very strong levels, bounced back strongly in October, to a composite headline of 68 which is 4 points above both August and Econoday's consensus. Strength is led by future sales, up 5 points to 78, with current sales at 75 for what is also a 5 point gain. Traffic, however, continues to remain below breakeven 50, at 48 for a 1 point gain but still reflecting lack of participation from first-time buyers.

Hurricane effects have not been prominent in this report though the South did show some weakness in September. For October, the South popped 4 points higher to a composite score of 69 which is next in strength only to the West which, though dipping 3 points, is at 76 in a reminder that this region is a key focus for home builders. The Midwest is also strong at 65 while the Northeast lags far back as always at 50.

Sales of new homes were very strong at the outset of the year but have faded since though housing permits have been coming alive in recent months. This report, much like other measurements of economic confidence, has been very solid this year and is pointing to a possible year-end uplift for new housing.

Market Consensus Before Announcement
Optimism among home builders eased noticeably in September though hurricane effects were hard to identify. Current sales dipped as did traffic which has been stubbornly weak through the whole expansion and reflecting lack of interest among first-time buyers. Forecasters see the housing market index holding unchanged at 64 in October.

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.