The NAHB/Wells Fargo housing market index takes a surprising turn higher in February to 42 after an unrevised 35 in the prior month. The Econoday consensus looks for a reading of 36. The February index is the highest since 46 in September 2022 and suggests that recent declines in mortgage rates have had a positive impact for builders of single-family homes.

However, rates are starting to climb again as markets anticipate further tightening of Fed monetary policy. This may make the improvement in February a one-off, although there may be some residual from buyers who have prequalified for a mortgage but not yet committed to a purchase.

The index for single-family sales is up 6 points to 46 in February, the highest since 54 in September 2022. The expected sales index is up 11 points to 48 in February, the highest since 49 in July 2022. The buyer traffic index is up 6 points to 29 in February and the highest since 31 in September 2022.

After falling each month in 2022, the housing market index ended the dismal streak in January, up 4 points to 35. February's consensus is a further 2 point improvement to 37.

The housing market index is a monthly composite that tracks home builder assessments of present and future sales as well as buyer traffic. The 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 of 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.