Housing Market Index Shows Weakness

The housing market index from the nation's home builders shows weakness, at 62 for November and missing the Econoday consensus by 2 points. And compared to a revised October, the index is down 3 points. Yet readings in the report, though slowing, remain solid and one important detail is favorable.

Of the report's three components, future sales are down a sizable 5 points but the level is still in the seventies, exactly at 70. Present sales, which is the most heavily weighted component, fell 3 points to 67, also still a strong level.

The positive in the report is a 1 point rise in traffic, a component which, at 48 in the latest report, has been lagging badly but is getting closer to the breakeven 50 mark. Weakness in this reading has been reflecting lack of first-time buyers in the market.

Turning to regional data, the highest composite score goes to the West, at an enormously strong 77, followed by the South, at 62. Two less watched regions for new homes, the Midwest and North, trail at 59 and 52.

There are positives in this report but the decline in both future and present sales is a reminder that both starts and permits for single-family homes have been slowing. Despite the rise in traffic, this report probably pulls back the housing outlook by a degree.

Recent History Of This Indicator:
Strength for the new home market has been the signal from the housing market index since back in June, and continued strength is expected for the November report with the Econoday consensus calling for a steady reading of 64. Future sales have been the leading component in this report, pointing to gains ahead for single-family permits. Holding back the index has been the traffic component where lack of first-time buyers is a major negative.