Foot traffic as measured by NAR Research’s Diffusion Index bounced back in February following two months of sharp decline. This improvement suggests that the year-over-year decline in existing home sales should stabilize in the months ahead, though at a level sharply lower than the spring of 2013. Slower demand will press up on inventories which are anemic, moderating price growth to a more sustainable pattern to the benefit of consumers.
Every month SentriLock, LLC. provides NAR Research with data on the number of properties shown by a REALTOR®. Lockboxes made by SentriLock, LLC. are used in roughly a third of home showings across the nation. 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. For the month of February, the diffusion index for foot traffic rose 7.2 points to 26.2 after declining 32.3 points in the previous three months.
The index is well below the “50” mark which indicates that more than half of the roughly 200 markets in this panel had weaker foot traffic in February of 2014 than the same month a year earlier. This reading does not suggest how much of a decrease in traffic there was, just that the majority of markets experienced less foot traffic in February of 2014 than 12 months earlier.
This upward movement in foot traffic relative to last year is important for the spring market as it alleviates fears of a secular downward drift. Mortgage rates were more than a percentage point lower at this time last year and prices have risen to the detriment of affordability, but consumers’ purchase power remains strong by historical standards. The psychological impact of this change, bidding wars and few options took a toll. A more sustainable market with slower price growth and a moderation of credit overlays would benefit the spring market.