| What HousingIntelligence Market Dashboard Reports Tell You |
| Written by Amy Anderson | |
| 08.03.2007 | |
Discuss this article on the forums. (0 posts)  The first section of our monthly Market Dashboard Report is the National Overview. This section shows the trends of major economic indicators. For those of you who have purchased an enhanced subscription to view these reports, the following information helps define and explain the significance of the measures included in these reports.National Overview 1.1 NAHB Home Affordability Index measures the percentage of homes sold that families making the median household income for that metro area could afford to buy. An index of 100 indicates that 100% of households making the median household income could afford to buy a home. 1.2 Builder confidence is typically used as a predictor of future financial market health. Studies (using Standard & Poor's 500 stock market index, with a one-year lag) have shown a strong, positive correlation between current builder confidence and future stock market returns. 1.3 Consumer confidence is a measure of consumer consumption in the area (including housing consumption). 1.4 Disposable Personal Income is defined as personal income less taxes. This is considered a fairer representation of consumers' ability to spend (as it relates to income). It's after-tax income. 1.5 Annualized Real Gross Domestic Product (GDP) Growth Rate shows the real growth rate (growth in excess of inflation) of the GDP or the output of goods and services produced by labor and property located in the United States. The Real Gross Domestic Product is the sum of the output of goods and services that are located in the United States. GDP is a measure of total spending in consumer spending, business spending, and government purchases. Two consecutive quarters of negative GDP growth is considered a period of recession. 1.6 Unemployment estimates of the number of unemployed individuals. This measure gives insight whether the local economy is expanding or contracting. 1.7 Retail Sales figures provide an early indication of sales by retail companies and are used to analyze market trends and determine the direction of the economy. Retail sales are also used as an input for estimating Gross Domestic Product. 1.8 Industrial Production Index measures the physical output of the entire nation's industrial sectors including factories, mines and utilities. In total, industrial production makes up less than 1/5 of the economy, but it accounts for most of its cyclical variation. 1.9 Major Interest Rates – Tracking interest rates can give you insight into affordability and buying power of individual homeowners. For instance, under a traditional 30-year fixed mortgage, for a person seeking a $300,000 loan, a half-point increase adds about $100 to the monthly payment. 1.10 Construction Spending measures the amount of money being invested into residential and commercial spending. Continued investment will only occur if demand exists to support necessary returns both for business and individuals. Construction spending also provides information on the valuations of stocks of homebuilders and large-scale construction contractors. 1.11 Producer Based Inflation (PPI) and Consumer Based Inflation (CPI) are indices that measure the average change over time in the selling prices of goods and services. PPI's measure price change from the perspective of the seller and CPI measures price change from the purchaser's perspective. CPI and PPI measures are indexed on a December 1982=100 base. A higher-than-expected PPI or CPI can cause interest rates to rise, and lower-than-expected measure will cause interest rates to fall. 1.12 Homeowner Vacancy Rate is the proportion of the homeowner inventory that is vacant for sale. A low vacancy rate indicates a strong match between supply & demand. 2.1 Percentage of Adjustable Rate Loans is important to track as these creative financing measures have already proven to have some detrimental impacts. Adjustable rate mortgages were initially attractive to buyers because of inexpensive introductory interest rates. These rates, however, can adjust as soon as two years after the initial close, resulting in substantial monthly payment increases. Particularly in areas that experiences large price surges, there has been a surprising increase in late loan payments or defaults on loans. 2.2 Pending Home Sale Index tracks housing contract activity. The index reports signed real estate contracts for existing single-family homes, condos and co-ops as a signed contract is not technically considered a sale until the transaction closes. An index of 100 is equal to the average level of contract activity. 2.3 Manufactured Housing Placements are collected by a monthly sample of new manufactured homes shipped by manufacturers. Manufactured housing has become a significant component of supply as an increasingly acceptable affordable housing option. 2.4 Shelter and Rent CPI Components are components of the previously defined CPI. Rent and rental equivalence that tracks the rent of primary residence or owners equivalent to rent, are the main components of the Shelter Index. The index for an aggregate measure, such as the Shelter index, is the weighted average of the component indexes. Shelter and components are indexed on a December 1982=100 base. 2.5 Housing Related Producer Price Index Components dissects the main components of the PPI intricate to housing construction. PPI measures price change from the perspective of the seller. PPI measures are indexed on a December 1982=100 base. 2.6 Single Family Housing includes sample of new single-family home variables including permits, homes starts, home sales (New residential sales estimates only include new single-family residential structures), and new home inventory. 2.7 Months Supply of New Homes is the ratio of houses for sale to houses sold. This statistic provides an indication of the size of the for sale inventory in relation to the number of houses currently being sold. The months' supply indicates how long the current for sale inventory would last given the current sales rate if no additional new houses were built. 2.8 National Home Price Indices are established to analyze and track trends of housing values over time. Chart 2.9 compares estimates from NAR (National Association of Realtors), NAHB (National Association of Home Builders) and OFHEO (Office of Federal Housing Enterprise Oversight). There are variances in the ways that each group projects the home price index: The NAR index is based on median housing values, but they do not include any measure of repeat sales methodology. The OFHEO index does include methodology to address repeat sales, but records include Fannie Mae and Freddie Mac mortgages only that omits all higher end homes. This issue is particularly significant in overvalued markets. Despite the differences in methodologies between the measures, most often they move with each other validating the same trends. 
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