Housing Market Index falls in January

Indicating continuing concerns among the nation's home builders about the market for single-family homes, the National Association of Home Builders' Housing Market Index declined four points to 54 in January. This was the second consecutive monthly decline.

"January's reading marks the lowest this index has been since February of 1997 and is an indication that, despite favorable interest rates, builders perceive that the recent stock market contraction and lower consumer confidence are affecting demand for new homes," said Robert Mitchell, NAHB president, in a release.

Mitchell noted that while the index is adjusted to account for seasonal factors, unusually cold weather may also have contributed to the decline.

He said that NAHB is forecasting a modest 5 percent slowdown in sales activity in 2001. "Keeping things in perspective, the year 2000 was one of the best years in history for new home sales," he said. Mitchell added that NAHB is expecting improving financial conditions in the form of even lower interest rates to help stabilize the housing market in the near term.

The Housing Market Index is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years. Home builders are asked to rate current sales of single-family homes and sales expectations for the next six months as "good," "fair" or "poor."

They also are asked to rate traffic of prospective buyers as either "high to very high," "average" or "low to very low." Scores for responses to each component are used to calculate a seasonally adjusted overall index, where any number higher than 50 indicates that more builders view sales conditions as good than poor.

All three component indexes fell in January. The index for current sales of new single-family homes fell three points from December, to 60, while the index for expected sales in the next six months declined two points to 61 and the index gauging traffic of prospective buyers fell three points to 39.