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| Big Changes in Traffic Signal Bottoms in Housing Cycles |
| Written by Jonathan Smoke | |
| 03.20.2008 | |
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Discuss this article on the forums. (0 posts) On Monday, Wells Fargo and NAHB released the March Housing Market Index (HMI). At first it didn’t seem very newsworthy as the overall index and most of the components remained unchanged from February. The overall index reading of 20 reflects dismal confidence (above 50 is good), but at least the reading is off of its 22+ year historical low of 18, which was set this past December. But since I talked about Atlanta traffic yesterday, I decided to dig a little further on the traffic component. I found something interesting about the February reading (March was unchanged). In February, the Traffic component, which measures whether builders report traffic is high, low or average, jumped from 14 to 19, a change of 35.7%. I decided to see just how often that sort of a change occurred. Here’s what I found. Only once has a month-over-month change been higher—and that occurred in February 1991. Does that ring a bell, anyone? The last major housing downturn. In fact, in the 22+ year history of HMI readings, there have only been 4 times when the change in the reading has been more than 30%. February 1991, January 1992, November 2001 and February 2008. Does anyone remember what it was like in October 2001? Housing and investments almost ground to a halt with 9/11, but with Fed actions and improved national confidence, housing came back with a vengeance just a few weeks later. In fact, that’s probably what started the excesses of this decade as housing became the over-done investment du jour. No one called September 2001 a housing downturn, because it was too brief a period. But I remember. Traffic tanked. Deals were off. It was very scary. That sounds a lot like general conditions at the end of 2007, but for different reasons. Of course traffic is still low, as is builder confidence, but if this limited history is any guide, the February jump is a good sign. Couple that with ShareYourTraffic's observations that traffic conversion is strong and cancellations continue to fall, 2008 has better days in store. 
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