Issuu on Google+




By Christopher Thornberg

U.S. housing market data has been sending mixed

benchmarks to create population estimates, problems that messages over the past year. On the negative side, ex- have led to large-scale historical revisions in the past. isting home sales had been growing steadily since the start of 2015, but slumped sharply in August. Data from The Census again modified their statistical techniques the Flow of Funds (FOF) shows outstanding mortgage at the start of 2015, but this time they didn’t bother to debt has yet to rise in any meaningful way and, worse, reassess past estimates. As such, the numbers for 2014 median prices as reported by the National Association and 2015 are not actually comparable. Recent numbers of Realtors appear to have fallen “...the recovery is moving out from another data source, the slightly in the last four months. American Community Survey, of the high end of the market, suggest that the actual ownership Single-family building permits a welcome broadening that rate in the U.S. last year was 63.1 have been rising slowly but resignifies things are getting percent, considerably lower than main far below normal levels, even as home ownership rates—as the initial HVS estimate. Imbetter rather than worse.” measured by the U.S. Census— portantly, this suggests that the unexpectedly fell at the start of the year. Concerns correctly-calculated 2015 HVS numbers indicate homesurrounding Federal Reserve policy and its impact on ownership is again on the rise—albeit at a slow pace and interest rates is also worrying investors. from a historically low level. But a rise is a rise. With context, however, most of these issues become far more benign than they appear. In fact, it looks like the nation’s housing market will continue on its modest recovery path for at least the next couple of years. Let’s start with the drop in ownership rates at the beginning of 2015, from 64.5 percent last year to 63.5 percent this year—the sharpest decrease since the peak of the housing crisis, according to the Census Bureau’s Housing Vacancy Survey (HVS). This appears to be an artifact rather than reality. This survey has been long criticized for its small sample and difficulty in finding appropriate



According to the National Association of Realtors (NAR), the median price of an existing single-family home rose to $217,000 in 2015, up 4.7 percent from last year, but seemingly peaked a few months ago, and has since dropped to levels below where they were in January. This is out of sync with other price measures like the Case-Shiller and CoreLogic Home Price Indexes (HPI), which have shown home price growth accelerating in recent months. The explanation is that the median price does not control for sales. When the median price is flat compared to a quality-controlled HPI, it implies a shift to sales among lower end units. This suggests that

Vol 4, Issue 5