US: Housing Market Index

December 18, 2017 09:00 CST

Consensus Consensus Range Actual Previous Revised
Housing Market Index 70 69 to 71 74 70 69

New home sales began to surge back in September and are now giving a significant lift to home builder sentiment as the housing market index rose a very sharp 5 points to a new expansion high at 74. The traffic component is a standout in the December report, surging 8 points to an expansion high of 58 to indicate a flood of new buyers in the market. Current sales are up 4 points at 81 with 6-month sales up 3 points to 79, also expansion highs. The West has a composite score of 85 followed by the Midwest at 76 and South at 75. The Northeast lags at 53. Today's report points to strength for tomorrow's housing starts and permits report.

Market Consensus Before Announcement
Home builders have been reporting rising confidence going into year end with the housing market index moving 4 points higher in October to 68 followed by a 2 point gain in November to 70 and the best reading since March. Strength in this report has not translated this year to equivalent strength in actual housing data though new home sales have in fact been coming alive in recent months. Forecasters see December's index holding at 70.

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.