The NAHB/Wells Fargo housing market index is down 5 points to 42 in February after an unrevised 47 in January and is below 48 in February a year ago. The February index is below the consensus of 47 in the Econoday survey of forecasters. Homebuilders' confidence is weaker as they face confusion regarding hopes for an easier regulatory environment while facing greater uncertainty about costs and availability of building materials, and little expectation for lower mortgage rates in the near future.

While the weekly Freddie Mac rate for a 30-year fixed rate mortgage has eased a bit to as low as 6.87 percent in the February 13 week from the near-term peak of 7.04 percent in the January 16 week, rates this close to 7 percent can discourage buyers. The present increased concerns about labor market conditions for workers in the government and technology sectors may be spilling over into related industries. Potential homebuyers could be avoiding the housing market until they are surer about their prospects in their current employment.

The index for present sales is down 4 points to 46 in February to its lowest since 45 in September 2024. The buyer traffic index is down 3 points to 29 in February. Both of these could be due in part to some bitterly cold weather in many parts of the US and not a cause for undue pessimism. However, the expected sales index plunges 13 points to 46 in February and is the lowest since 45 in December 2023. Builders' confidence in the future is back to recessionary levels.

The NAHB reported notes that lack of demand for new housing means homebuilders are less willing to offer incentives in a cooler market. In February, 59 percent of homebuilders offer some sort of sales incentive , down from 61 percent in January and the lowest since 59 percent in May 2024 and 57 percent in April 2024. A price cut is offered by 26 percent of homebuilders compared to 30 percent in January and the lowest since 25 percent in April 2024. The size of the price cut is 5 percent in February, and has been there for the past four months.

Builder sentiment is seen holding steady with the housing market index at 47 in February after firming to 47 in January from 46 in December.

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.