A week ago we introduced a new measure of foot traffic, the foot traffic volume index. This week we provide an update on the August trend in traffic. Foot traffic rose on a seasonally adjusted basis for the second consecutive month suggesting an end to the downward trend posted this summer.
Foot traffic has a strong correlation to future sales, leading the latter by two to three months. NAR Research collects information on foot traffic from Sentrilock, Inc. which manufactures lock-boxes for the industry.
The foot traffic volume index (SAAR) rose 3.4 percent in August relative to a month earlier, the second consecutive increase. More significantly, the trend rose 1.7 percent relative to August of last year, the second consecutive increase following a six-month string of year-over-year declines. This month’s measure appears to have cemented a shift away from withering foot traffic.
At the local level, raw traffic rose in roughly half of markets. Honolulu for instance has seen a sharp increase in interest over the last two months. Traffic in August was up 16.0 percent relative to the same period in 2016.
Conversely, foot traffic was 12.0 percent lower than a year ago in San Diego, a trend that has held since January. Local inventory conditions in San Diego are very tight with days on market roughly 10 percent lower as of August, limiting the number of potential views of a home and weighing on traffic. The downward trend is thus a reflection of limitations rather than consumer interest.
Foot traffic rebounded nicely in August establishing a resurgent trend. The recent drop in mortgage rates combined with a steady secular improvement in employment and consumer confidence will continue to bring consumers out to shop. However, inventory, or the lack of it, will bind foot traffic until new construction ramps up.