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December’s Housing Market Saw a Drop in Buyer Traffic

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Housing market index in December

According to the National Association of Home Builders (or NAHB), the housing market index (or HMI) fell by a single point to reach a level of 61.0 in December as compared to 62.0 in November 2015. Though the index fell in December, the HMI continued to stay above the level of 60.0. As a result, the SPDR S&P Homebuilders ETF (XHB) and the iShares US Home Construction (ITB) rose 0.64% and 1.1%, respectively, as of December 15. Also, home building D.R. Horton (DHI), Lennar (LEN), and PulteGroup (PHM) rose 1.0%, 1.3%, and 1.2%, respectively, as of December 15.

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“For the past seven months, builder confidence levels have averaged in the low 60s, which is in line with a gradual, consistent recovery,” said NAHB Chief Economist David Crowe in a press release. He added, “With job creation, economic growth and growing household formations, we anticipate the housing market to continue to pick up traction as we head into 2016.”

Future expectations fell by two points in December

The HMI provides a better outlook for housing activity as it’s based on direct responses from home builders. Builders tend not to commit new funds to the business unless they are confident about the uptick in housing activity. Though the component that gauges sales expectations in the next six months fell to 67 from 69 index points, it stayed above the neutral mark of 50. This implies that builders are optimistic about future housing demand.

Buyer traffic fell by two points in December

In December, the current sales conditions component fell by two points to the index level of 66.

Buyer traffic continued to stay below the neutral level of 50 in December. The component fell two points and reached 46 in December. Higher home prices and limited housing inventories kept prospective buyers away from the housing market. However, with household income rising, the housing market may attract more prospective buyers toward it.

Let’s see how the German economic sentiment is trending in the next article.

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