Housing Market Index Tops High Expectations

A strong gain in current sales gave a major boost to the housing market index which, coming in at 64 for October, topped Econoday's high-end forecast for the highest reading since 2005. Current sales, the most heavily weighted component, rose 3 points to 70, strength that points to further gains for new home sales. Pointing to gains for permits and for future sales is a striking 7 point gain to 75 in expected sales six months from now. Still slightly sub-par traffic, unchanged at a sub-50 level of 47, isn't holding down sales, though the lack of traffic does point to lack of participation from first-time home buyers. Otherwise, this report is a standout for the housing outlook and will raise expectations for strength in tomorrow's housing starts & permits report. Regional data is led by the West, a key sector for new homes where the composite score is up a very sharp 11 points to 76. Following behind is the South, which is the largest sector for new homes where the index is up 1 point to 67. The Midwest follows at 59 with the Northeast, which is by far the smallest region for new homes, continuing to lag at 47.

Recent History Of This Indicator: The housing market index has been running at 10-year highs and steady news is expected for the October reading, at a consensus 62 for no change. The only lagging component has been traffic but this has been on the climb in recent reports. Supply of new homes on the market is low and interest rates are low, two central positives to motivate builders.