Wednesday, December 2, 2020

First look at the 2021 economy: housing

 - by New Deal democrat

As I’ve pointed out for years, housing is a long leading indicator. It can give us a decent read on the direction of the overall economy 12 to 18 months out.

So the strength in the housing market in the past 6 months has been a powerful positive omen for the economy going into 2021.

Yesterday residential construction spending for October was reported, and continued that string of very positive signs. The below graph compares inflation-adjusted residential construction spending with single family housing permits since the construction series began in 2002:

These are the two least volatile of all of the housing metrics. Since sales have to be made first, and permits obtained, before construction starts, typically construction - while the least volatile of all metrics - lags permits somewhat. But right now, both are at 10 year+ highs.

I put together a much more comprehensive overview of the housing market, including mortgage rates, sales, prices, and inventory, and it is posted at Seeking Alpha.

As usual, clicking over and reading puts a penny or two in my pocket to reward me for my efforts, as well as giving you useful economic information about the future.