Purchasing Managers Index Important Confidence Indicator For New Homes

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Peoples Home Equity comments before the March March 3rds purchasing manager index is released by the Institute of Supply Management.

Peoples Home Equity expects to see a slight rise in Monday’s ISM purchasing managers index. The index value is important since it’s calculated through a range of categories that are influenced for housing demand and supply. Next week in general will be a light week in terms of housing data, thus Peoples Home Equity does not expect to see much fluctuation in mortgage rates.

The Institute for Supply Management (ISM) will release its purchasing managers index(PMI) on Monday March 3rd. The index is based on customer responses for: New Orders, Backlog of Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories, Customers' Inventories, Employment and Prices. Since many of these categories are linked to housing news and the production and materials related thereto, Peoples Home Equity pays attention to this index.

A PMI™ reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. The higher reading since 1950 has been 77.50, while the lowest reading has been 29.40. In the past 10 years, the lowest reading was in December 2008 at 33.1. Recently, the January PMI index value was 51.3 which was the lowest number since May 2013. The index declined -9.2% from December 2013 to January 2014.

Peoples Home Equity thinks PMI needs to continue and post values at or above 54 to infer confidence that home builders will continue producing new homes. New homes are important because they give an opportunity to existing home owners to move. Existing homeowners transferring to news homes is important because it allows first-time home buyers to buy up existing homes, and put more inventory on the market to feed the current overabundance of demand.

The lender thinks a rebound should be in the works since the economy is continuing to expand even if it’s at a slower pace.

Please contact Peoples Home Equity loan officer today for mortgage details at: (855)-897-0300

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Giorgio U Ferrero
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