US: Housing Market Index

Wed Jan 17 09:00:00 CST 2018

Consensus Consensus Range Actual Previous
Housing Market Index 73 70 to 75 72 74

Sentiment remains very strong among the nation's home builders whose housing market index is at 72 in January, holding onto half of December's 4 point surge which holds unrevised at an expansion high of 74.

A key strength in January, as it especially was in December, is the traffic component which is at 54 and outside of December's 58 is a 13-year high. The sudden gain in traffic points to new interest among first-time buyers.

The report's other components both show outstanding strength, at 79 for present sales and 78 for 6-month sales. The West leads composite scores at 83 followed by the South at 72 and the Midwest at 69. And like the traffic component, another feature of this report is sudden acceleration in the Northeast which moved over 50 in November and is at a very strong 62 in today's report for January.

Housing data have been pivoting higher the last several months and confirmation of strength in tomorrow's housing starts and permits data could very well focus new attention on the momentum underway in the sector.

Market Consensus Before Announcement
Confidence among the nation's home builders has been unusually strong. The traffic component was the highlight of the last housing market report, jumping to a long-term high and pointing to a buyer surge in the new home market. Current sales and future sales likewise hit long-term highs. Econoday's January consensus calls for only the slightest slowing in the housing market index to 73 from December's 74.

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.