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By New_Deal_democrat August 24, 2017 10:57 am
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The 2017 housing stall continues
Yesterday's new home sales report -- subject always, to sharp revisions -- for now confirms the slowdown in the housing market. Although the previous months were revised higher, sales of new single family homes have failed to make a new high for --- months (blue in the graph below), and confirm the stagnation shown by the much less volatile metric of permits for single family homes (red):

Here's what the 3 month moving average of new home sales, that smooths out most of the volatility, looks like so far this year:

Jan 575k
Feb 584k
Mar 617k
Apr 614k
May 615k
Jun 613k
Jul 606k

The three month moving average has failed to make a new high since March.

A look at median prices shows a very slow uptrend since the beginning of last year:

The three month moving average of YoY prices also shows this deceleration -- although the overall trend is still positive:

This morning's report on existing home sales tells the same story, falling to the lowest level in 10 months, at 5.44 million annualized (the below graph has not yet been updated with today's reading):
Note that we had a similar stall, for a similar reason, in the first part of 2014. This was due to the interest rate "taper tantrum of mid-2013, as  shown by the below graph of mortgage rates:

We had a smaller increase in rates last November following the Presidential election.  From late 2013 through much of 2016, there was a general declining trend in interest rates, one that so far is being repeated this year. I do not pretend to have any special insight into the direction of interest rates from here.  What I can say is that *if* the pattern repeats, YoY interest rates will be lower beginning this November, and that will begin to help the housing market thereafter. Further, the demographic tailwind is still favorable for a continued increase in sales.
But there are also two factors militating against a repeat of the growth of late 2014 and 2015. First, there isn't any big decrease in gas prices feeding into an increase in disposable income. Second, house prices increases have continued to outpace wage growth and are almost certainly keeping some potential buyers out of the market.
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