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Thursday, May 10, 2007

US Home Sales, Fed Rates



Attached is a chart on major housing indicators for the US - housing starts, new home sales and existing home sales. At a trend level (measured by the 12mma of month-on-month growth), all three are de-growing. The sharpest de-growth is visible housing starts, the most closely tracked housing indicator.

The National Association of Realtors' forecast seems to suggest that existing home sales de-growth maybe close to its bottom, new-home sales are likely to witness a far sharper slowdown going forward.

The Fed has noted the cooling off in the housing market . In its March FOMC statement it noted that " Recent indicators have been mixed and the adjustment in the housing sector is ongoing." In its statement for May, to be released at 11:45 pm India time today, it is likely to reiterate the slowdown in the housing market. Rising asset prices had been a key concern for the Fed when it started hiking rates in 2003.