US: Housing Market Index

Thu Nov 16 09:00:00 CST 2017

Consensus Consensus Range Actual Previous
Housing Market Index 67 66 to 70 70 68

Home builders are reporting acceleration going into year-end with November's 70 reading for the housing market index the best since March. Both current and future sales are very strong, each at 77, and traffic is improving, up 2 points to 50 for its best reading since May.

The Northeast is the smallest region for home builders but its composite score this month is up very sharply to 63 and nearly matches the Midwest which is at 65. The West, at 77, and the South, at 72, are the focused regions for home builders.

Strength in this report has not translated this year to strength in actual housing data though today's results are, in general at least, favorable for tomorrow's housing starts & permits data.

Market Consensus Before Announcement
After easing from very strong levels, optimism among home builders bounced back strongly in October, to a composite headline of 68 which easily beat Econoday's consensus. Current and future sales both jumped sharply though traffic, reflecting lack of first-time buyers, continued to lag in the distance. Forecasters see November's housing market index at 67.

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.