Interest Rate Roundup

Monday, November 19, 2007

Housing market index hugging its lows

The National Association of Home Builders just released its latest monthly index. The Housing Market Index tracks what home builders think about the state of business. In November ...

* The overall Housing Market Index held steady at 19 (October's reading was revised up by a point from the originally reported level of 18). That was slightly better than the consensus forecast of a decline to 17. But a reading of 19 is still the lowest since the NAHB started publishing its index in 1985. It's also well off the year-ago level of 33 and the cycle peak of 72 in June 2005.

* Among the subindices, the index measuring present single family home sales remained at 18. The index measuring expectations about future sales dipped a point to 25 from 26, while the index measuring prospective buyer traffic inched up to 17 from 15.

* Regionally, the index measuring prospective buyer traffic rose in two regions (the West -- to 18 from 15 -- and the Northeast -- to 27 from 26). It dropped in the Midwest -- to 13 from 14 -- and the South -- to 19 from 21.

November looks like another crummy month for the housing industry. The NAHB is blaming negative media reports for the weakness. But that's nothing compared to the tough underlying fundamentals. In no particular order, they include: the tightening mortgage market, slumping consumer confidence, rising jobless claims, a weakening economy, and excess housing inventories. These forces should continue to weigh on home sales and home prices well into next year -- no matter what's on the front pages of the nation's newspapers.


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