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By New_Deal_democrat October 1, 2015 9:41 am
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The Housing market September 2015: a good example of leading and lagging trends

This happens to be a good time to restate the sequence in which housing data runs:

 

  • 1st, interest rates turn
  • 2nd, home sales turn
  • 3rd, home prices turn
  • 4th, inventory turns

 

The reason this is a good time to examine the timing is because mortgage rates made a 50 year low in late 2012.  Then in mid 2013 we had the "taper tantrum" which caused rates to rise close to 2%.  Then rates settled down roughly in the middle.

 

So let's see how that rippled through the housing market.

 

This first graph shows the YoY change in interest rates (blue), inverted so that a decrease in rates shows as a rise in the line, compared with housing permits (red):

 

 

The low in interest rates in the beginning of 2012 is reflected in a YoY surge in housing permits that peaked 6-9 months later. The YoY change in permits stalled out in 2014, beginning about 6 months after the "taper tantrum", and ending about 6 months after interest rates settled into their current level.

 

Next, here are housing permits (in red again) vs. the YoY% change in the median price of existing homes (green), which are about 90% of the market:

 

 

The surge in house prices happened in mid-2014, about 1 year after the surge in permits.  Prices settled back into a small 5% YoY increase at about the same time as permits stalled, but have continued in that range even as permits have improved.

 

Finally, let's compare the YoY% change in the median price of existing homes (green again), with the YoY% change in the inventory of existing homes (dark red):

 

 

Inventory surged in mid-2014, about 1 year after prices did, and have recently turned negative YoY, about 1 year after prices increases abated.

 

So we have a nice progression from low interest rates in late 2012 through a big sales increase in early 2013, to a big price increase later in 2013, and finally to an increase in inventory later in 2014.   The "taper tantrum" of 2013 flowed through to a stall in permits in 2014, to a slower increase in prices in 2014 into 2015, to a decline in inventory this year.

 

Most recently interest rates have been lower YoY.  Permits have improved in the last 4 months.  That should continue.   It should feed through into bigger price increases, and in turn call forth more inventory for sale.

 
 
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