As the “pulse of the single-family housing market”, the Housing Market Index is a monthly product of the National Association of Homebuilders. Its scores range from 1-100, with a reading a 50 or better suggesting “favorable conditions” for builders.

Because of its methodology, the Housing Market Index can offer excellent insight into the Oak Park market for newly-built homes. This is because its value is a composite of three survey questions:

1. How are market conditions today?
2. How do market conditions look 6 months from now?
3. How is the prospective traffic of new buyers for new homes?

Builder responses are collected, weighted, then presented as the Housing Market Index.

According to the NAHB, October’s HMI reading of 16 is its highest value in 5 months. The uptick hints that the market for newly-built homes may rebound more quickly that this summer’s weak new homes sales figures would otherwise suggest.

You’ll remember that, between April and August, the number of new homes sold per month fell by 30 percent and the available, new home inventory climbed 2.3 months.

This month, though, builders report much better foot traffic and, as a result, have raised their expectations for the next six months of sales. Low mortgage rates are likely aiding the optimism, too.

As compared to 1 year ago, average, 30-year fixed mortgage rates are lower by 0.75 percent, a payment savings of $45 per $100,000 borrowed.

The sales of newly-built homes soared in March. Even more than what was expected. But the news may not be as glowing as what the media is telling us.

Take a look at the headlines from last Friday:

• Sales of new homes rocketed up 27 percent in March (WaPo)
• New-home sales rise fastest in 47 years (CNNMoney)
• Sales of New Homes Climb by Most Since 1963 (Business Week)

None of these statements is false, per se, but each is somewhat misleading.  The biggest reason why March’s New Home Sales was even able to rise 27 percent is because data from the month before it — February — was the worst in New Home Sales history.

In February, new homes sold posted its lowest level in recorded history.

A better comparison would be against March a year earlier; or October 2009, the month before the home buyer tax credit’s initial expiration date.

Against both of those time periods, March 2010 fared well.

Home buyers – first-timers and repeats alike — went under contract last month, taking advantage of the soon-to-expire federal home buyer tax credit program.  The credit gives up to $8,000 for first-time buyers and up to $6,500 for repeat ones.

Buyers must be in mutual contract on or before April 30, 2010 to be eligible for the credit, and must closed on or before June 30, 2010.

The New Home Sales data included other strong housing data, too. The current supply of new homes nationwide is at a multi-year low.  Along with stronger home demand, this should push Chicago home prices higher throughout the coming months.

It’s no wonder builders are bullish on the economy.

Winter has been tough for home sales.

After a big drop of 17% December, the January Existing Home Sales report yielded a 7% slide.  An “existing home” is a home not being resold by a previous owner.  It essentially excluded only new construction.

Existing Home Sales data on an annualized and adjusted basis shows:

1. 1. 1. Sales volume is at its lowest levels since June 2009
      2. Sales volume fell below its 12-month rolling average
      3. Home supplies are at a 5-month high

This mirrors the data from the government’s New Home Sales data released last week.  That report put new home sales at a 40-year low and showed new homes supplies higher by an entire month.

This is not a crisis and hasn’t moved housing off of its rebound.  Home sales are always cyclical and outside forces always influence the market.  Now is no exception.

For one, home sales were so high in October and November due to the original November 2009 first time home buyer tax credit expiration.  Many buyers shifted out of December/January and into October/November.  This is a natural reason for the dip.

Over the long-term trend, the numbers came in near to what you’d expect as a rolling average.  A smaller, but important part was that January’s weather was awful from Mexico to Canada.  That will slow down home sales.

We’re seeing higher activity in February and March.  It’s unlikely that we’ll see a repeat of last Apri-November’s run, but there are enough buyers to support this housing rebound. The good news of the sagging sales reports is that today’s buyers may find home prices are lower and sellers are more willing to negotiate.

New Home Sales dropped last month by 11% and hit the lowest levels in the 47 years that the index has been tracked.

This is great news for current home shoppers.  The housing market was rallying all year, pushing the home supply down to 7 months by last October.  Supply was down, demand was up, and the best deals on homes were all turning into multiple offer situations in many markets.

We’re seeing continued general strength in the housing market, but last month’s data revealed a brief pause.  Additional supply should lead to better negotiating power for buyers and more favorable terms on items like closing costs concessions and free upgrades from builders.

The reasons for the spike in supply are varied:

• The original home buyer tax credit expired in November
• Weather conditions were awful in most of the country in January
• Weak employment and consumer confidence continue to hinder big ticket sales

The is all a matter of timing.  This data is over a month old now.  Market conditions in the street today determine the price you’ll get today. Still, this is great timing for people making offers in the very short term.  Next month’s report will likely look a little better.

With the tax credit expiring, FHA interest rates rallying, and a generally improving housing market, it looks like a great time to buy.