The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.

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June 20, 2006

The Housing Market Shows Signs Of Life -- Except Where I Live

I'm not sure it means all that much, other than the data just refuses to provide any support for the full-blown crash scenario. From Bloomberg:

Housing starts rose a greater-than-expected 5 percent to an annual rate of 1.957 million, the Commerce Department said today in Washington. Building permits, a sign of future construction, fell 2.1 percent to the lowest level since November 2003.

While the increase in starts doesn't change the outlook for a cooling housing market, the number may reassure investors and Federal Reserve policy makers that the slowdown won't become a rout. Atlanta Fed President Jack Guynn and Dallas Fed President Richard Fisher yesterday predicted a moderate softening in the industry.

"There's no question housing is slowing down, but it's not falling off a cliff,'' said Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio ...

By region, the clear laggard last month was the midwest...




... illustrating of the proposition that the winners in April will be later to lose -- or something like that:




Given such month-to-month variation, it's a good idea to take a look at the trend over a slightly lnger period of time.  From the beginning of the year, say:




How does that stack up to last year's performance?




I'll leave it to you to decide if that is a big change or not.

If you like the pretty pictures, they are a mere click away:

Download HousingStartsbyRegion06.20.06.ppt

(Thanks to Brent Meyer for supplying me with those templates.)

June 20, 2006 in Data Releases , Housing | Permalink


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Do you mean a crash in the homebuilding business, or a crash in the price of homes? The homebuilders will tend to keep building as long as marginal revenue exceeds marginal cost. As far as home prices, if supply increases faster than household formation increases, then it sets the stage for a price decline. Moreover, the new-home builders can always undersell the homeowners, down to a price level equal to marginal cost.

Having observed the price decline in Southern California in the early 1990s, I'd expect that in a downturn, prices will be sticky downward. My two-cent guess is for a long, protracted decline in the metros that have had high gains, until mortgage payments are close to market rents.

Posted by: mousebender | June 23, 2006 at 02:03 AM

mouse -- Sure, but marginal revenue can equal marginal cost at high or low demand. In any event, whether we look at prices or quantities, the data is still supporting a slowdown, not a collapse. Maybe its still early, though...

Posted by: Dave Altig | June 24, 2006 at 08:24 AM

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