The NAHB/Wells Fargo housing market index is up 1 point to 47 in January after an unrevised 46 in December. It is the highest since 51 in April 2024. The consensus for January is 46 in the Econoday survey of forecasters. The uptick in the index is mainly due to present sales of single-family homes while expected sales of homes is weaker.

The index for present sales is up 3 points to 51 in January, the highest since 51 in May 2024. Present sales probably got some support from the dip in mortgage interest rates in December and anticipation of higher rates in the near future. Homebuyers who secured a mortgage in December would be signing contracts in January to avoid losing rate locks. This also accounts for the 2-point rise in the index for buyer traffic to 33 in January, the highest since 35 in April 2024.

The weekly Freddie Mac rate for a 30-year fixed rate mortgage was 6.60 percent in the December 12, 2024 week, but started to rise thereafter. As of the January 9 week, it is up to 6.93 percent.

The index for expected sales in the near future is down 6 points to 60 in January, although it remains consistent with anticipation of positive purchasing activity. Homebuilders are balancing the risks. On the downside there are mortgage rates remaining close to 7 percent which seem to be a breaking point for homebuyers in the current market along with higher prices and costlier financing for suitable building lots, and higher labor costs. On the plus side, the US economy continues to expand moderately, consumers are experiencing broadly modest wage growth, inflation is easing, and builders hope for easing in building regulations.

In January, 61 percent of homebuilders offered incentives to buyers, up from 60 percent in December and down from 62 percent in January 2024. Thirty percent of homebuilders offered a price cut compared to 31 percent in December and January 2024. The size of the price cut is 5 percent in January and December 2024 compared to 6 percent in January a year ago.

The index is seen flat at 46 in January from 46 in December and not much changed from 44 a year ago.

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.