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The National Association of Home Builders Housing Market Index is one of the key housing market statistics that we track at FREEandCLEAR. The Housing Market Index incorporates factors such as current and expected new home sales and interest level from potential new home buyers. It is important to highlight that the index focuses on new home sales, so homes built by builders that have never been lived in before, as opposed to existing home sales, which represents a larger portion of the overall housing market.
The housing market index remains in positive territory although weakness in the first-time home buyer segment resulted in a monthly decline. For May 2015, the Housing Market Index came in at 54 as compared to 56 in April 2015. Any figure above 50 is considered positive and May represents the 11th consecutive month with the index above 50. The May figure came in below industry analyst expectations as the present sales and traffic components of the index dipped as compared to April. The present home sales component of the index dropped from 61 from 59. Home buyer traffic continues to be the weakest component of the index, dropping from in 41 in April to 39 in May. Any index component below 50 is considered to be weak and the lack of market participation by first-time home buyers continues to negatively impact traffic. On a positive note, the future home sales component of the index increased to 64 from 63, showing continued home builder optimism for a strong Spring home buying season. (Source: Bloomberg)
What it Means for Mortgage Borrowers
Although the May housing market index declined, it reflects the overall strength of the new home market. The relatively strong figures for the present sales and future home sales components of the index are positive indicators for the real estate and mortgage markets. Weakness from the first-time home buyer segment is not a new theme as home ownership by first-time buyers recently hit a multi-decade low. Although the new home market is smaller than the existing home market, May’s positive housing market index report suggests that home builders will continue to bring more supply onto the market, which is good news for prospective buyers. If you are in the market for a new home, use our Mortgage Qualification Calculator to determine what size mortgage you can afford and review our Mortgage Expert Insight on the Differences Between Buying a New Home and an Existing Home.
The FREEandCLEAR Mortgage Expert