The NAHB/Wells Fargo housing market index is down 3 points to 39 in March, the lowest since 39 in August 2024. The March reading is below the consensus of 42 in the Econoday survey of forecasters. Although homebuilders see positive developments in the regulatory environment and easing in mortgage rates, increasing building costs for materials and weak consumer confidence more than offset other considerations.

The monthly average Freddie Mac rate for a 30-year fixed rate mortgage is down to about 6.6 percent in the first weeks of March after around 6.8 percent in February and 7.0 percent in January. While some homebuyers will enter the market to take advantage of lower rates and greater affordability, others will hesitate on concerns about job security and a possible economic downturn. Additionally, increased supplies of existing units on the market will reduce demand for new construction.

The index for the present sales pace is down 3 points to 43 in March, the lowest since 41 in December 2023. The expected sales index is unchanged from the prior month at 47. The index for buyer traffic is down 5 points to 24 in March, the lowest since 24 in December 2023. The fall in the buyer traffic could be particularly discouraging for homebuilders as it occurs at the start of spring when home shopping typically begins to pick up the pace.

In March, 59 percent of homebuilders offered some sort of incentive to homebuyers, the same as in February and similar to 60 percent in March 2024. The share of homebuilders offering a price cut is 29 percent in March, up from 26 percent in February and 24 percent in March 2024. The average size of a price cut remains at 5 percent in March for the fifth month in a row, and slightly below 6 percent in March 2024.

Builder sentiment remains on the gloomy side with the housing market index expected flat at 42 in March after declining to 42 in February from 47 in January.

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.