Diffusion Index of Foot Traffic: Improving

Every month SentriLock, LLC. provides NAR Research with data on the number of properties shown by a REALTOR®.  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 a respectable 3.3 points to 66.9 in January.

This month’s improvement more than offsets the modest decline in the ready for December.  The measure has been above the critical 50 mark for four consecutive months.  The 50 mark indicates that more than half of the markets in this panel had stronger foot traffic in January of 2013 than the same month a year earlier.  This reading does not suggest how much of an increase in traffic there was, just that the majority of markets experienced more foot traffic in the most recent month compared to a year earlier.

Sales in the early spring of 2012 were atypically strong.  This month’s reading suggests that this spring is likely to be even stronger.   Fundamentals are in place to support this trend as record low mortgage rates and steadily improving job creation continue to boost buyer confidence.  Though inventories are constrained in portions of the U.S., rising prices will help to unlock inventory held off market by underwater owners and equity-strapped fence sitters.  Finally, clarity on the QM rule along with forthcoming finalization of the QRM and Basel III rules should provide lenders with the confidence needed to begin to ease underwriting to sound, historical norms later in 2013.

Ken Fears, Director, Regional Economics and Housing Finance

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.

More Posts