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By New_Deal_democrat April 24, 2018 10:53 am
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Housing: the Millennial tailwind buffeted by incresing interest rate and pricing headwinds
This morning's new home sales report showed a continued positive trend in housing, but with some underlying deterioration. It remains buoyed by the demographic tailwind, but contrary interest rate and price headwinds are intensifying. 
 
First of all, the absolute number was second only to December's:

 
The less volatile three month average only declined slightly from its peak one month ago.
 
Secondly, the number of new houses sold minus new houses for sale (i.e., not yet sold) tends to peak well in advance of any recession, and that metric also remains positive:
 
 
[Note: averaged quarterly to cut down noise]
 
BUT, this metric is obviously showing decelerating growth.  When we look at the YoY% change in houses sold vs. not yet sold, we see that has turned negative for the 3rd time in the last 4 Quarters:
 
 
By now means does this always signal an oncoming recession, but it does generally signal at least a slowdown.
 
Meanwhile, existing home sales, reported yesterday, have been basically flat for nearly 3 years! 
 
 
In all but 7 months since July 2015, they have been within 15k or 6.50 million units annualized.
 
Although I won't bother with a graph, in yesterday's and today's reports we continue to see YoY price increases of 5% or more across the board, in new home sales, existing home sales, the Case-Shiller indexes, and the FHFA house price index
 
Finally, it appears that as of last week we (just barely) broke a 30 year downtrend in mortgages, at 4.46% vs. 4.45% per the trend from 1987 through 2000 and 2008:
 
 
Yesterday and today mortgage rates have increased further.
 
In conclusion, the trend in new house building and sales remains positive, but stress is growing. How much more can the market stand before the increasing headwinds of higher interest rates and prices overcome the tailwind of the large Millennial generation entering prime house-buying age?
 
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