This morning the latest survey from the National Association of Home Builders was released and the details were a bit concerning.
The overall Housing Market Index (HMI) fell to a score of 42 from 47 the previous month. Like other survey measures, a reading below 50 means that more home builders view sales conditions as poor.
Source: Calculated Risk, as of 2/18/25
Two main factors seem to be leading to poor housing sentiment. First, elevated interest rates amid economic uncertainty have weighed on housing demand, now at the lowest level since 2020 according to Redfin. And second, home builders are concerned with future costs due to uncertainty over the scale and scope of future tariffs. The 1-month rate of change in future expected sales is the second largest drop on record, and at a reading of -13 is also the second lowest reading on record.
Source: Bloomberg, as of 2/18/25
This is notable because housing is usually a strong leading indicator of economic activity. Continued weakness may lead to a contraction in housing employment which historically happens about a year or so before a broader recession. So far, so good here. But housing equities, as measured by the iShares U.S. Home Construction ETF (ITB), are maybe sniffing something out as they are in a bear market – down 23% since the end of October. For all that is going right in the US economy right now, this is clearly one concern starting to creep in.
Source: 3Fourteen Research, as of 2/18/25
Sean Dillon, CMT, CFTe
SVP, Investment Strategy
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