Diffusion Index of Foot Traffic

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 surged more than 30 points to 71.4 in April.

The sharp increase this month is a reflection of last year’s strong early season, the “pop” in traffic last March and the subsequent decline. This month’s reading comes in above the important “50” mark. The 50 mark indicates that more than half of the markets in this panel had stronger foot traffic in April of 2013 than the same month a year earlier. This reading does not suggest how much of a decline in traffic there was, just that the majority of markets experienced more foot traffic in April of 2013 compared to a year earlier. Traffic rose significantly in parts of the Midwest and New York state, a reversal of last month’s year-over-year trend.

Record low mortgage rates continue to attract potential homeowners and investors, while rising prices and steady job creation have combined to boost buyer confidence and home sales. Rising prices may unlock many underwater homeowners to be able to sell, but builders are unlikely to be able to contribute significant supplies. As a result, foot traffic and sales are likely to outpace inventory replenishment resulting in steady price growth. Traffic should remain strong through the summer as mortgage rates are expected to remain low.

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.

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