Tuesday, September 24, 2013

New Home Sales Stalling Under Higher Rates

One of the bright spots for the US economy has been a rebounding housing market.  Depressed for the last four years as it worked off the massive excess of the housing bubble, the market has recently been rebounding.  Let's look at the data to see exactly what's been happening as of late.

New home sales dropped sharply in the latest report.  In addition, recent economic activity was revised lower.  While one month of data is too little data on which to draw a conclusion, anecdotal reports from several sources have indicated the recent increase in rates in having a negative effect on purchasers.

The above chart shows the numbers for housing permits in blue) and housing starts (in red) for the last year.  The numbers have been cresting.  However,

Placed in a larger context, we see that housing starts and permits, after rising since the beginning of 2011, are moving slightly lower.  This, again, is most likely due to the effects of higher rates.