The National Association of Home Builders released yesterday the results of it's monthly survey of home builders, the data from which serves to comprise the NAHB/Wells Fargo Housing Market Index (HMI). The survey indicated an improvement in builder's sentiment since the June survey, maintaining the positive trend that has occurred since the HMI index reached a low in January of 2009. The HMI index is not the most quantitatively rigorous measurement of the housing market, as the data is derived from a simple survey of home builders that seeks to gauge their perception of future activity. Additionally, the survey is only applicable to new, single family home construction and sales. One could argue however, that the survey is a leading indicator; based on the fact that the data is collected from a "boots on the ground" perspective that may not have had time to appear in other housing market indices/data releases. That being said, we thought it would be useful to compare the NAHB HMI to the S&P 500, using all available data from the only 24 year old HMI. It would seem that for the past decade at least, the HMI has been a leading indicator of major movements in the S&P 500. Of course, nothing can be firmly deduced from a time series as brief as 10 years, so take from the chart what you will.
*long several S&P500 stocks
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