US: Housing Market Index

Thu Feb 15 09:00:00 CST 2018

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

Extremely upbeat is the continuing description of home-builder confidence, at an as-expected 72 in February. Traffic remains the highlight, steady at 54 which is very strong for this reading and which suggests that first-time buyers are coming into the market. Assessments of current and future sales remain unusually strong, at 79 and 78 respectively. Regional strength is led by the West followed closely by both the South and Midwest. And though the Northeast lags, it's showing increasing strength. Capacity is the welcome challenge for builders and the new home market as the supply of homes continues to lag demand.

Market Consensus Before Announcement
Visible improvement in customer traffic has been giving a boost to the housing market index which is near expansion highs. Sales readings in this report, both current and expectations, have been very strong and accelerating and have correctly signaled the upturn underway for new home sales. Econoday's February consensus calls for steady strength, unchanged at 72.

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.