The NAHB/Wells Fargo housing market index bounces back to 44 in January after 37 in December. The December reading is well above the consensus of 38 in the Econoday survey of forecasters. All three components of the index are higher and reflect improved conditions associated with a decline in mortgage interest rates. The Freddie Mac weekly rate for a 30-year fixed rate mortgage has remained below 7 percent since mid-December and is at levels not seen since mid-2023. Homebuyers for single-family units are responding to better affordability.

The present sales index is up to 48 in January after 41 in December, and the highest since 50 in September 2023 when mortgage rates topped the 7 percent mark. The expected sales index is up to 57 in December after 45 in December, and is at its highest since 59 in July 2023. The index for buyer traffic is up to 29 in January from 24 in the prior month, a modest rise that suggests that there may not be as much home shopping going on, but those shoppers are more likely to be ready to buy.

In January, 31 percent of homebuilders are offering a cut in price, fewer than the 36 percent in November and December, but the same as January 2023. The average size of a price cut is 6 percent, the same as in December and January 2023. Among builders, 62 percent are offering some type of purchase incentive, higher than the 60 percent in December and 57 percent in January 2023.

The NAHB is forecasting expanding building of single-family homes in 2024 to meet demand while stocks of existing homes remain tight and while homebuyers see improved affordability with more moderate mortgage rates. However, NAHB Chief Economist Robert Dietz said,"As home building expands in 2024, the market will see growing supply-side challenges in the form of higher prices and/or shortages of lumber, lots and labor."

Forecasters expect the housing market index to rise 1 point to 38 in January after rising 3 points in December to 37. December saw gains in traffic and future sales tied to moderation in financing costs.

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.