The NAHB/Wells Fargo housing market index for July is up 1 point to 56 after an unrevised 55 in June. The July reading matches the consensus in the Econoday survey of forecasters. The index matches the 55 in July 2022 just before increases in mortgage rates began to rapidly cool the housing market. Homebuilders continue to benefit from meager supplies of existing homes. NAHB Chairman Alicia Huey said,"The lack of resale inventory means prospective home buyers who have not been priced out of the market continue to seek out new construction in greater numbers."

Homebuilders have recovered their optimism after the index plunged to a near-term low of 31 in December, but face more challenges.

Moderation in mortgage rates after the peaks in October and November 2022 combined with limited housing stocks to improve homebuilder confidence and bring buyers back in the market. However, mortgage rates are again nearing or exceeding 7 percent for a 30-year fixed rate mortgage. This is likely to drive some potential homebuyers out of the market and/or send them to adjustable rate mortgage to secure a loan. When and if mortgage rates return closer to the 6 percent-mark, there is likely to be a wave of refinancing.

In July, the index for current sales of single-family homes is up 1 point to 62, its highest since 64 in July 2022. The is consistent with homebuyers who have prequalified for a mortgage at a more favorable rate snapping up new construction whether not yet started, under construction, or completed. The index for buyer traffic is up 3 points to 40, its highest since 48 in June 2022. Future sales are not expected to be quite as good. The index for expected sales of single-family homes is down 2 points to 60 in July from June, but is the highest since 61 in June 2022 after the 62 in June 2023.

The housing market index is expected to continue its recovery but only by 1 point, to 56 in July after rising 5 points in June to a much better-than-expected 55.

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.