Housing Market Index jumps eight points in December ?01

Indicating that low interest rates and solid house-price appreciation are motivating new home buyers, the National Association of Home Builders' Housing Market Index rose eight points to 57 in December 2001, according to an NAHB news release.

"This is the largest monthly increase in the HMI since 1998, and marks a return to the index's general range of strength prior to Sept. 11," said Bruce Smith, NAHB president and a home builder from Walnut Creek, Calif.

"Builders remain concerned about the situation in some markets particularly in the Midwest, where job losses have been most concentrated. However, the very favorable interest-rate environment and strong investment potential of homeownership are proving to be powerful incentives for buyers whose jobs have not been impacted by recent economic weakness," he added.

The HMI is derived from a monthly survey of builders. Home builders are asked to rate current sales of single-family homes and sales expectations for the next six months.

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

Each of the three component indexes rose eight points in December 2001. The index gauging current sales of single-family homes rose to 60 from the previous month's 52 reading, while the index for expected sales in the next six months rose to 64 from a previous 56 and the index for traffic of prospective buyers rose to 46 from a previous 38.