The Housing Market Index: Strong Trends, Correlated Components, and A Weak Northeast

(This is an excerpt from an article I originally published on Seeking Alpha on November 19, 2013. Click here to read the entire piece.)

The National Association of Homebuilders (NAHB) just released its November, 2013 report on builder confidence: the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). It showed no change from the previous month’s 54 reading. This marks six months in a row where the majority of builders see good conditions in the housing market. While this confidence may come as a surprise given looming headwinds in the market, it probably does not surprise those of you following the earnings reports from the builders. {snip}

So what caught my eye in this report was the difference across regions…{snip}

What also caught my eye this time is the breakdown of the HMI across its three different components. {snip}

I was VERY surprised to see that expectations for future sales could be so high while impressions on traffic of prospective buyers is so poor….{snip}…the HMI really acts like a gauge on current sales conditions even as impressions for future sales conditions are almost always more optimistic than current sales. Thus, HMI only indicates future housing conditions to the extent that current conditions can be extrapolated to do the same thing.

Click for a larger view…

Source: The National Association of Home Builders

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Source: FreeStockCharts.com (snapshot in the middle of the trading day)

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Be careful out there!

(This is an excerpt from an article I originally published on Seeking Alpha on November 19, 2013. Click here to read the entire piece.)

Full disclosure: long TPH and PGEM