New Home Market Solid

Growth in the new home market is solid but not accelerating, based on the housing market index which edged 1 point lower in the July report to a 59 level that is still well above breakeven 50. Home builders are reporting very strong and stable sales, at 63 vs June's 64, but a little less optimism for future sales, at 66 for a 3 point dip. The real weakness in the report continues to be centered in traffic where the index slipped 1 point and remains well under 50 at 45. Weakness in traffic is tied in part to lack of interest from first-time buyers.

The West, which is a key region for home builders, remains well out in front, at a composite index of 70 followed by the South which is at 60. The Midwest is solid at 56 while the Northeast, a region that is already well developed, far behind at 42.

Today's results, though not robust, shouldn't upset expectations for solid gains in tomorrow's building starts & permits data. Housing data have been volatile but continue to point to a positive contribution from the sector to overall economic growth.

Recent History Of This Indicator:
The housing market index came alive in June, rising 2 points to 60 and ending four straight months at 58. And more strength is expected for July where forecasters are calling for a 1 point gain to 61. Improvement in traffic was a big plus for June and a similar gain for July would lift what is becoming a solidly favorable outlook for new homes.