Housing Market Index Holds Onto September Surge

The new home sector picked up steam in the third quarter and looks to end the second half with strength. The housing market index held on to the bulk of its 6-point surge in September, coming in at 63 for October in only a 2 point slip. Home builders are very optimistic about future sales, the leading component of the report which is at 72 and up 1 point in the month. Current sales are down 2 points but are very strong at 69. Traffic continues to lag, down 1 point to 46 but with the trend still showing slight improvement.

Regional data show the West out in front, at a 3-month composite average of 75 followed by the South at 65. These two regions are top priorities for the nation's home builders. The Midwest is also positive at 56 while the Northeast, which is already densely developed, remains well below the break-even line, at 43.

The lack of traffic is a concern, perhaps reflecting the lack of new homes coming on the market and also a lack of prospective first-time buyers many of whom are content to rent. But the new home market is a major highlight of the economy right now, where expansion is being limited by construction constraints but is still pointing to spillover into the still muted resale market.

Recent History Of This Indicator:
The housing market index surged 5 points in September to 65 for the best reading in a year and forecasters see only a 2 point give back in October to 63. Home builders have been growing increasingly confident as new home sales begin to pick up sharply. Present sales and expectations of future sales have been very strong in this report while traffic, which had been lagging back, has also begun to pick up.