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Diffusion Index of Foot Traffic

Every month SentriLock, LLC. provides NAR Research with data on the number of showings. Foot traffic has a strong correlation with future contracts and home sales, so it can be viewed as a peek ahead at sales trends two to three months into the future. In the latest reading, the diffusion index for foot traffic rose for the second consecutive month, reaching 66.3, up from 61.7 in October.

November’s rise in the diffusion index indicates that more than half of the markets in this panel had stronger foot traffic in November of 2012 than the same month a year earlier. This reading does not suggest how much of an increase in traffic there was, just that the increase was broadly spread across the US. Foot traffic had seesawed for several months. However, it is worth noting that in the summer of 2011, traffic rose sharply relative to a year earlier, so the period of plateau in the summer of 2012 reflects a comparison to strong increases a year earlier. Furthermore, tight inventories in the West are creating a drag on foot traffic as REALTORS® have fewer properties to show their clients. Still, record low mortgage rates along with stable employment growth are driving a robust recovery in buyer confidence. A restoration of traditional, sound underwriting would help to extend credit to a broader section of the market, expanding this trend and further shoring up the recovery.

Ken Fears, Manager, Regional Economics and Housing Finance Policy

Ken Fears is the Manager of Regional Economics and Housing Finance Policy. He focuses on regional and local market trends found in the Local Market Reports and the Market Watch Reports . He also writes on developments in the mortgage industry and foreclosures.

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