The NAHB/Wells Fargo housing market index is up 3 points to 37 in December after an unrevised 34 in November. The December reading is slightly above the consensus of 36 in the Econoday survey of forecasters. While the present pace of sales for new-built single family homes is unchanged, builders are more positive about the future and seeing stronger buyer traffic. Behind the change is moderation in mortgage rates in recent weeks. The average rate for a 30-year fixed rate mortgage shows a near-term peak of 7.7 percent in November, up from 7.2 percent in October, but December to-date is down to about 7.4 percent.

NAHB Chief Economist Robert Dietz said,"The housing market appears to have passed peak mortgage rates for this cycle, and this should help to spur home buyer demand in the coming months, with the HMI component measuring future sales expectations up six points in December."

The index for present sales of new single-family homes is unchanged at 40 in December after 40 in November, and remains the lowest since 40 in January. However, this is for sales using financing taken out at higher interest rates. The index for future sales of single-family homes is up 6 points to 45 in December after 39 in November, and is the highest since 49 in September when mortgage rates began to hit the 7 percent mark. The index for buyer traffic is up 3 points to 24 in December, showing that potential homebuyers are at least coming out to look.

In December, 36 percent of homebuilders reported reducing prices, the same as in November and the highest since November 2022, according to the NAHB. For all forms of incentives, 60 percent of homebuilders offered some sort of inducement to buy in December, the same as in November.

Forecasters expect the housing market index to edge 2 points higher in December after falling 6 points in November to 34. This was much lower than expected and reflected high financing costs and high home prices.

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.