The NAHB/Wells Fargo housing market index is up 2 points to 43 in October from the prior month. It is just above the consensus of 42 in the Econoday survey of forecasters. The index is now up for a second month in a row and back to the 43 seen in June. Homebuilders are navigating a difficult period regarding demand for new housing stock. There are more existing units on the market at a time when potential homebuyers remain sensitive to mortgage rates and prices.

Builders got a boost in the near term in September when rates mortgage rates were on the decline, but early October has seen these rising again. The rate on a Freddie Mac 30-year fixed rate mortgage was 6.35 percent in the September 5 week, fell to 6.08 percent in the September 26 week, and has risen to 6.32 percent as of the October 10 week. There will be homebuyers who locked in a mortgage at a lower rate in September who will be in the market for a home before the lock expires. There is also expectation that the FOMC will lower short-term rates further in November and December that should help bring rates down again, although financial market uncertainty until after the election may delay that.

The index for single-family sales in October is up to 47, its highest since 48 in June. The index for expected single-family home sales is up to 57, its highest since 60 in April. The index for buyer traffic is up to 29 in October, the firmest since 30 in May. Taken together, homebuilders are seeing improved conditions overall but are not as optimistic as they were early this year.

In September, 32 percent of homebuilders said they had cut prices, the same as in September and October 2023. The average price reduction in October is 6 percent, up from 5 percent in September, and the same as in October 2023. Among homebuilders, 62 percent said they offered some sort of incentives, up from 61 percent in September and the same as October 2023.

Forecasters expect the index to show continued stabilization at 42 in October, up from 41 in September and 39 in August. The September increase broke a string of four consecutive declines.

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.