April Housing Market Index Shows Small Drop

Written by: Christy Rakoczy

At 10:00 AM EST on April 16, 2012, the April housing market index was released. This index is created through a survey of home-builders asked to rate economic and housing market conditions to determine confidence in the market and the economy as a whole. The index is based on a weighted average of several categories including presents sales of new houses, sales of houses expected in the subsequent six months, and the number of perspective buyer’s viewing new homes.

According to the April 16, 2012 release, the homebuilder outlook declined in April, with the numbers suggesting that the market remains weak despite the prior months of steady gains.  The overall builder sentiment index fell from 28 in March to 25 in the newest release, surprising some analysts who had expected the index to rise to 29. Builders also expressed weaker confidence in sales figures for the next six months and the metric representing this outlook fell from 36 to 32.

The decline in the overall builder sentiment index is the first in a long time. The sentiment index had risen steadily between September and February and in March, the index had remained unchanged at 28 in three out of the four regions of the U.S. The only change occurred in the West, where gains were indicated.

The decline in the confidence related to six-month sales figures was also the first decline in a long time, as this number had increased for the prior six months.

The small declines announced in April are an indication that the housing market is still very weak despite the modest gains enjoyed over the prior six months.  Of course, reviewing the results over the prior six months, market conditions still appear much improved over the prior year. The six-month figures released in March were the highest since June 2007 and were a vast improvement over the 17 that was reported in September and the 15 reported in June.

However, the numbers still have a long way to go to indicate a positive sentiment about the market.  To indicate positive sentiment, the numbers must reach 50 or above. This has not been achieved since the peak of the housing boom in 2006.


April Housing Market Index Shows Small Drop

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