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By New_Deal_democrat February 25, 2015 2:35 pm
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The US housing recovery is strengthening

Earlier this month I wrote that housing was primed for a breakout to the upside (and since what happens to housing this year is likely to show up in the broader economy next year, that is good news).  While housing didn't break out to new highs, the trend of gradually improving numbers has continued.

As I've written many times before, interest rates lead new housing sales and starts, and sales of new housing leads prices.  So let's start with this updated graph of I mortgage interest rates (red, inverted), housing permits (green), and new single family home sales (blue):

In case the improving trend isn't apparent, here is the same information presented YoY:

New single family home sales in particular have responded to the changes in interest rates with about a six month lag.

Since we can decompose permits into single family units vs. multi-unit construction, let's do that. Here is the growth in permits for single family structures (blue) vs. multi-unit structures (red) since the bottom 5 years ago:

In general multiunit structures have slightly outperformed single family homebuilding, and in particular one year ago. In the last few months, single family home construction has caught up.

Here's the same information presented YoY, better to show the trend:

Since the economy gets a bigger bang out of single family house than apartments or condos, this recent improvement bodes well.

Finally, let's compare single family home sales with prices:

Prices started higher 3 years ago, one year after sales. They can be expected to continue to rise.

Reacting to a slowdown in house price increases several months ago that showed up in the Case Shiller index yesterday! S&P's David Blitzer said "The housing recovery is faltering.  While prices and sales of existing homes are close to normal, construction and new home sales remain weak."

Needless to say, I wholeheartedly disagree.  So does Bill McBride, a/k/a Calculated Risk:
The slowdown in price increases simply followed the flatlining of home sales and permits one year ago. The housing recovery is not faltering. In fact it is starting to strengthen.

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