The NAHB/Wells Fargo housing market index surprises to the upside at 55 in June from 50 in May and is the highest since 55 in July 2022. The June reading is above the consensus of 50 in the Econoday survey of forecasters. Homebuilders and developers are concerned about the cost of financing land and new projects, and about the potential for further tightening in credit conditions. However, the NAHB sees the current rate cycle as near its peak. In the meantime, limited inventories of existing homes and improvements in supply chains for building materials means builders have reason for optimism.

The index for current single-family home sales is up 5 points to 61 in June, its highest since 64 in July 2022. It would appear that buyers who pre-qualified for mortgages in April and May when rates were lower are in the market. Homebuilders have an advantage over the existing home market in that they can close a sale on a property not yet started or under construction. The ongoing meager inventories of existing homes may have lifted expectations for the near future despite the somewhat higher mortgage rates in June. The index for expected sales of single-family homes is up 6 points to 62 in June, its highest since 63 in May 2022. The index for buyer traffic is up 4 points to 37, its highest since 37 in July 2022. The reading suggests that while traffic is low, those who are shopping for a home are serious in their interest.

The housing market index has been on the rebound, jumping a surprising 5 points in May to 50 with June expected to see no further gain.

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.