The housing market is an important element of the U.S. economy and it was the cause of the last financial crisis. We track four key pieces of housing data: existing home sales, housing starts, new home sales and the NAHB HMI. From 2011 through 2013 (or even more recently), there were clear uptrends in the charts of this housing data. Positive trends and the housing market recovery are under threat now. Rising home prices, still tight credit standards, rising mortgage rates, shrinking household formation, stagnant wages, a lack of skilled labor and the weather have been held accountable for recent weakness.
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The NAHB Housing Market Index (HMI) may be the best indicator for judging the overall health of the housing market. The HMI was ahead of the curve in forecasting the imminent demise of the market. From 2005 to 2006, the HMI leveled off and turned down well before the other data began to crumble. Then it bottomed in late 2009-early 2010 as the recovery took hold. After peaking last year, above 50, the HMI has turned noticeably lower and is currently at 45.
Existing home and new home sales have also reversed. Housing starts have turned up, but are still below the average of the past three decades and a lot of the activity here is in multi-family dwellings, not single-family homes which is a negative. Aside from harsh winter weather, all that may or may not ail the housing market remains. It might be time to lower housing expectations.