One can argue that economic data on housing activity is lagging and that a trader needs to
find indicators that are more coincident with activity or even leading. A valuable source
for assessing housing activity in the United States is the survey releases of the National
Association of Housing Builders (NAHB). According to the NAHB, “The Housing Market
Index (HMI) is based on a monthly survey of NAHB members designed to take the pulse
of the housing industry, especially the single-family industry. The survey asks respondents
to rate general economic and housing market conditions.”
By looking at the HMI data for 2005 and 2006 we can discern an increasing pessimism
on the health of the housing market (see Tables 1.2 and 1.3). The survey results
in the summer of 2005 were at a peak on all HMI component measures. The Federal
Reserve stopped increasing rates in August 2006, reflecting their judgment that the economy
didn’t require more rate increases. Using the HMI index, the forex trader saw asignificant weakening in the housing market, which was an omen that increases in rates
were increasingly not likely. At the end of 2006, the HMI survey shows that the previous
rate of decline in housing starts was slowing down. This can be interpreted as possible
bottoming out of the housing market. Using this data, those traders expecting an interest
rate decrease would have to reconsider their confidence in a rate cut.
The importance of housing data as an indicator for traders is reflected in the fact that
new sources of data on housing are being developed for investors. One of the more recent
sources is the Standard & Poor’s (S&P)/Case-Shiller home price index. It is a benchmark
measure for housing prices. It tracks the value of single-family homes in the United
States. Twenty metropolitan areas are tracked, and the index is measured monthly. Thelast Tuesday of each month at 9 A.M. is the release time of the announcement. Traders
looking for leading indicators of a housing recovery will likely see it in increases in housing
prices tracked by this monthly index, posted at www.indices.standardandpoors.com.
Detailed housing data can also be found at www.macromarkets.com.
find indicators that are more coincident with activity or even leading. A valuable source
for assessing housing activity in the United States is the survey releases of the National
Association of Housing Builders (NAHB). According to the NAHB, “The Housing Market
Index (HMI) is based on a monthly survey of NAHB members designed to take the pulse
of the housing industry, especially the single-family industry. The survey asks respondents
to rate general economic and housing market conditions.”
By looking at the HMI data for 2005 and 2006 we can discern an increasing pessimism
on the health of the housing market (see Tables 1.2 and 1.3). The survey results
in the summer of 2005 were at a peak on all HMI component measures. The Federal
Reserve stopped increasing rates in August 2006, reflecting their judgment that the economy
didn’t require more rate increases. Using the HMI index, the forex trader saw asignificant weakening in the housing market, which was an omen that increases in rates
were increasingly not likely. At the end of 2006, the HMI survey shows that the previous
rate of decline in housing starts was slowing down. This can be interpreted as possible
bottoming out of the housing market. Using this data, those traders expecting an interest
rate decrease would have to reconsider their confidence in a rate cut.
The importance of housing data as an indicator for traders is reflected in the fact that
new sources of data on housing are being developed for investors. One of the more recent
sources is the Standard & Poor’s (S&P)/Case-Shiller home price index. It is a benchmark
measure for housing prices. It tracks the value of single-family homes in the United
States. Twenty metropolitan areas are tracked, and the index is measured monthly. Thelast Tuesday of each month at 9 A.M. is the release time of the announcement. Traders
looking for leading indicators of a housing recovery will likely see it in increases in housing
prices tracked by this monthly index, posted at www.indices.standardandpoors.com.
Detailed housing data can also be found at www.macromarkets.com.
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