US: Housing Market Index

August 15, 2018 09:00 CDT

Consensus Consensus Range Actual Previous
Housing Market Index 68 66 to 69 67 68

Rising construction costs tied in part to tariffs are holding down builder confidence which, though slipping 1 point in August, is still very solid at 67. Still this is the lowest reading since September last year.

Both current and future sales slipped 1 point, to 73 and 72 respectively, with buyer traffic down 2 points and for the first time since October last year is back under 50 at 49. Weakness here points to lack of first-time buyers which has been a negative for housing throughout the ongoing expansion.

And builders are increasingly concerned about affordability which reflects a lack of skilled construction labor, buildable lots and high lumber costs with the latter reflecting what the report says are tariffs and the threat of a trade war. Watch tomorrow for housing starts and permits.

Market Consensus Before Announcement
Labor scarcity and high prices for materials have been limiting home builder confidence in recent months. Expectations for August's housing market index are another 68 vs 68 in both July and June.

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.