Foot traffic is a strong indicator of the demand for housing and is a leading indicator of home sales. Every month, NAR publishes data on foot traffic as measured by the number of times SentriLock lock boxes are opened. The data for May was the 6th consecutive month of expansion in the national foot traffic index. Local trends bode well also with the vast majority in our sub-market panel showing expansion.
Despite a steady upward movement in mortgage rates in late April and May, demand for housing remains strong. The diffusion index for foot traffic eased 1.8 to 59.0, 13.8 points higher than the same time in 2014. A measure above the “50” mark indicates that more than half of the roughly 200 markets in this panel had stronger foot traffic in May of 2015 than the same month a year earlier. But this index does not tell us how much stronger traffic is.
At a local level, NAR Research tracks a panel of 14 cities. With this data, one can assess both the direction of the trend in foot traffic (up/down) and a rough magnitude of the change. The table below depicts the change in foot traffic this year relative to the same time a year earlier, which eliminates the impact of seasonal variation:
- Relative to last year, 10 markets expanded, while Salem, Boulder, Kingston, and Honolulu contracted.
- With the exception of Salem, all of the markets that declined relative to last year, improved relative to last month’s year-over-year measure (not pictured).
- The strongest improvements in traffic relative to last year were in San Diego, Iowa City, and El Paso.
While foot traffic is falling in some markets, that is not necessarily an indication of a decline in demand. After nearly three years of low supply, traffic may fall in certain markets due to lack of opportunities for an open house.
Foot traffic continues to signal a positive summer trend for home sales. Improvements to economic fundamentals like employment, access and pricing support current shoppers, but rising rates will create a headwind later this year. Over the long-term, wage growth and expanded supply can help to ameliorate these factors.