The NAHB/Wells Fargo housing market index slips further in June to 43 after an unrevised 45 in May following 51 in April. The index is a little below the June consensus of 45 in the Econoday survey of forecasters. In spite of some modest improvement in mortgage interest rates in early June, homebuyers remain wary of taking on a mortgage while rates are close to 7 percent. The Freddie Mac monthly average rate has been just above or below 7.0 percent since April. Weekly measures of mortgage rates have fallen a bit in the most recent two or three weeks in anticipation of future rate cuts by the Federal Reserve, although rhetoric from FOMC members remains decidedly cautious.

The index for present home sales is down 4 points to 48 in June and the expected sales index is down 4 points to 47. The index for buyer traffic is down 2 points to 28. Homebuilders' perceptions of conditions are broadly the weakest since February.

NAHB Chair Carl Harris said,"Persistently high mortgage rates are keeping many prospective buyers on the sidelines." He continued,"Home builders are also dealing with higher rates for construction and development loans, chronic labor shortages and a dearth of buildable lots."

NAHB Chief Economist Robert Dietz notes that Fed rate decisions include the problem of ongoing high inflation for shelter costs. To address this, he said,"The best way to bring down shelter inflation and push the overall inflation rate down to the 2% range is to increase the nation's housing supply. A more favorable interest rate environment for construction and development loans would help to achieve this aim."

In June, 29 percent of builders offered a price cut, up from 25 percent in May and the highest since 31 percent in January. However, the size of the price cut remains at 6 percent where it has been for 12 straight months. There is also an increase in the number of builders offering incentives to 61 percent in June after 59 percent in May and the highest since 62 percent in January.

The housing market index dropped sharply in May, down 6 points to a much lower-than-expected 45 reflecting acceptance among builders that mortgage rates will not be coming down. June's consensus is no change at 45.

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.