The NAHB/Wells Fargo housing market index is up 2 points to 41 in September after an unrevised 39 in August. The index is above the consensus of 40 in the Econoday survey of forecasters and is up after four months of declines. Recent moderation in mortgage interest rates have returned some optimism to homebuilders with improved affordability for buyers and lower financing costs for construction projects.

The present sales index is up to 45 in September after 44 in August. The index for buyer traffic is up 2 points to 27 in September and has been little changed for the last four months. The current pace of sales and home shopping reflects ongoing patience on the part of some potential homebuyers who are hoping mortgage rates will come down further. Rates are likely to trend somewhat lower especially if the FOMC signals more cuts in the near future. The index for expected sales is up 4 points to 53 in September to its highest since 60 in April.

The Freddie Mac rate for a 30-year fixed rate mortgage is down to 6.20 percent as of the September 12 data, its lowest since 6.02 percent in the September 11, 2022 week. The current rates are enough to bring at least some buyers into the market, although there will be hesitation to commit with the prospect of rates nearer or even below 6 percent.

The improvement in builder confidence is seen with less inclination to cut prices or offer incentives in September. The share of builders cutting prices is down to 32 percent in September after 33 percent in August with the average size of the price cut down to 5 percent after 6 percent in the prior month. The share of builders offering incentives is down to 61 percent in September after rising to 64 percent in August.

Despite prospects for lower mortgage rates, the housing market index in August fell an unexpected 3 points to 39. A rebound is not expected for September where the consensus is 40.

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.