Home Builders Optimistic, But Less So Than Expected

Home builders remain optimistic but are a little less so based on the housing market index which is down 1 point in the January report to a 60 level that remains well above breakeven 50. But the traffic component, reflecting weak participation from first-time buyers, is falling further below 50, to 44 for a second straight 2 point loss. Up 2 points, however, is the present sales component which at 67 is pointing to strength for new home sales which have been struggling to gain momentum. The component for future sales is down 3 points to a still very strong 63 which, however, is the lowest reading since May. Regional data show the West out in front at a composite score of 73 followed by the South at 60 and the Midwest at 58. The Northeast, which is by far the smallest region for new homes, is at 47. Today's results are respectable but won't be lifting estimates for tomorrow's housing starts & permits data which are expected to come in no better than mixed. The housing sector has been showing life but isn't yet a leading driver of economic growth.

Recent History Of This Indicator:
The new home market has been solid though the housing market index has been losing a little steam, down 4 points over two months to a still very strong 61 in December. Forecasters see the index gaining back 1 point in January to 62. Sales indications have been strong in this report though the traffic component, reflecting weak interest on the part of first-time buyers, has been noticeably lagging.