Housing Market Update: January Housing Market Index
The Housing Market Index (HMI) of the National Association of Home Builders fell to 8.0 in January 2009 from 9.0 in December 2008. Before the onset of the current recession, the record low for the HMI was 20.0 during the 1990-91 recession (see chart 1). The question now is: What is the low for the HMI? The answer is unknown, but we can say that the severity of the housing market situation grows in leaps and bounds everyday.
Among the sub-categories that make up the HMI, small gains of the indexes tracking sales in the next six months (17 vs. 16 in December) and traffic of prospective buyers (8.0 vs. 7.0 in December) are encouraging. On a regional basis, the HMI held steady in the West (6.0) and advanced in the South (11.0 vs. 10 in December) but fell in the Northeast (10 vs. 11 in December) and West (4.0 vs. 7.0 in December).
The HMI is strongly correlated with sales of new single-family homes (see chart 3). Based on this historical relationship, it appears that a pickup in new sales in the near term is unlikely. Housing starts data for December will be published on January 22. Stay tuned for this commentary tomorrow.
