The NAHB/Wells Fargo housing market index in November reflects ongoing softness in demand for new single-family homes despite moderation in mortgage interest rates. Consumers remain cautious about committing to buying a home while the outlook for the US economy and the labor market faces significant downside risks, especially in the wake of the 42 day-long government shutdown.

The NAHB index is up 1 point to 38 in November after 37 in October and 46 in November 2024. The November reading is just above the consensus of 37 in the Econoday survey of forecasters. The index has remained below the 50-mark that signals expansion since 51 in April 2024. The Freddie Mac average rate for a 30-year fixed rate mortgage is 6.23 percent for November to date, quite similar to the average of 6.25 percent in October. These are some of the lowest rates in over two years and would normally be an incentive to enter the housing market, especially with more existing housing stock and price moderation creating more buyer-friendly conditions.

The November index for present sales is up 2 points to 41 while the index for expected sales is down 3 points to 51. The buyer traffic index for November is up 1 point to 26 and the highest since 29 in February. Qualified buyers are willing to purchase now where they find the right unit at the right price, but the outlook is less positive.

The NAHB said that 41 percent of homebuilders offered a price cut, up three-tenths from 38 percent in October and a record high. The average size of a price cut is 6 percent, the same as in October. For the third month in a row, 65 percent of homebuilders reported offering sales incentives.

The consensus looks for the index to hold steady at 37 in November from 37 in October and up from a recent low of 32 in September.

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.