Interest Rate Drop Not Driving Demand For Housing

The drop this month in interest rates isn't driving up demand for housing, based on weekly mortgage bankers data for purchase applications and now on the housing market index from the nation's home builders which is down 5 points to 54. The key in October's report is the traffic component which is down a full 6 points to 41. Lack of traffic points to lack of interest including lack of interest from the important group of first-time home buyers. The report's two other components are also down with present sales down 6 points to 57 and future sales down 3 points to 64.

All regions show declines in their composite scores especially the Midwest which is down 8 points to 53 and the West which is down 7 points to 54. The South, which is by far the largest region for new homes, continues to lead, at 59 for a 4 point dip in the month. The Northeast is by the smallest region for new homes and trails in this report at 40 for a 2 point dip.

New home builders can't blame high interest rates or high unemployment for the weakness in their sector. Housing starts for September will be posted tomorrow morning at 8:30 a.m. ET.

Recent History Of This Indicator:
The NAHB housing market index for September was boosted by rising traffic, posting at 59 this month vs August's already strong 50-plus reading of 55. The traffic component, which has been lagging badly, was up 5 points to a near-50 reading of 47 (readings above 50 indicate monthly growth). The present sales component was also up 5 points, to 63 in what points specifically to September gains for new home sales. The future sales component was at 67 for a 2 point gain.