19 June 2001, 11:24  Up, but no upward momentum

By Mark Serlin Washington, June 18 (BridgeNews) - As is the case with: 1) the Conference Board's index of consumer confidence, 2) the University of Michigan measure of consumer sentiment, and 3) the ABC/Money Magazine measure of consumer confidence, the latest readings from the National Association of Home-Builders show builder SENTIMENT going sideways near the lows for the recent move down. While the June NAHB index (and 2 of the 3 sub-indices) moved higher on the month, no new ground was broken on charts, the gain serves only as "noise" within a sideways range, and longer-term downtrends remain in effect. The overall index advanced to 58 from a downward revised 56. That 2 point overall increase was the result of a 3 point gain in the current sales sub-index (59% of the overall index) to 64, a 1 point increase in the 6-month sales outlook sub-index (14% of the total) to 67, and an unchanged reading in the traffic sub-index (27% weighting) of 42.
PERHAPS THE MOST NOTEWORTHY DEVELOPMENT IN THE HOUSING DATA IS THE DIVERGENCE BETWEEN THE NAHB INDEX AND THE NEW PURCHASE INDEX FROM THE MORTAGE BANKERS ASSOCIATION. WHILE THE NAHB HAS BEEN TRENDING LOWER FOR THE BETTER HALF OF THE PAST 2 YEARS, THE MBA PURCHASE INDEX HAS RECENTLY SET A NEW HIGH FOR THE CYCLE.
We suspect some of the relative builder pessimism is the result of builder specific problems that are weighing down the NAHB. However, the MBA purchase index appears to be benefiting from both generally low interest rates and a move by some investors out of the stock market and into real estate. Should the latter positive fundamentals continue, we suspect it is only a matter of time until builder sentiment improves. Looking ahead on the housing front, attention will now shift to tomorrow's release of housing starts and building permits. The NAHB and construction industry aggregate hours numbers set a neutral to positive tone.

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