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Making sense of housing market data

Amy Scott Mar 8, 2019
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If you follow business and financial news, you hear a lot about which way the wind is blowing in the housing market. Including on Marketplace. From housing starts and new home sales, to existing home sales and various price indices, figuring out what all these numbers mean can be head-spinning.

Even one of the biggest homebuilders recently looked at all the signals coming from the housing market and, basically, shrugged. In January, Stuart Miller, executive chairman of real estate company Lennar, told analysts the company wouldn’t give a forecast for the year. “We’ve been careful not to give too much guidance looking ahead because there’s uncertainty,” he said in an earnings call.

How to make sense of it all? First, keep in mind that some of these indicators are frequently revised and fluctuate sharply from one month to the next. “Often, the data is just not that clean on a month-to-month basis,” said Christopher Thornberg of Beacon Economics. “You need to see data over a number of months to really get a feel for what’s going on.”

And, said economist Susan Wachter at the Wharton School, any one measure on its own can only tell you so much. “In combination, all of these data sources have significantly more power than if you just look at them one by one,” she said.

With those caveats in mind, here are some of the top housing numbers we watch, and what to make of them.

Housing starts

Officially called New Residential Construction, this monthly report is jointly published by the U.S. Census Bureau and the Department of Housing and Urban Development, and is based on surveys of homebuilders. The report includes the number of new houses started and completed in a given month, as well as the number of building permits issued. Because the initial report is based on preliminary estimates from a relatively small sample, the numbers can be volatile, month-to-month, and are frequently revised. Nevertheless, housing starts are seen as an important measure of consumer demand and construction employment. Large declines have preceded every recession since 1960.

New home sales

Also from the U.S. Census Bureau and HUD, New Residential Sales is a monthly tally of the number of newly-constructed single family homes sold, the median sale price of those homes and the inventory of homes for sale. Though new homes make up only about ten percent of the market, sales are seen as a key indicator of housing demand and consumer spending. 

Existing home sales

This one comes from a trade group, the National Association of Realtors, and tracks sales of existing single-family homes, condos and co-ops. Based on closings from local multiple listing services, the report is based on a large sample size and not typically prone to large revisions. Existing home sales are seen as a lagging indicator, as buyers react to changes in income and mortgage rates. 

Pending home sales

Whereas existing home sales track actual closings, this index from the National Association of Realtors tallies sales when the contract is signed. As anyone who has bought a home well knows, the closing process can take a month or more, so pending sales are viewed as a more up-to-date indicator of demand.

Case-Shiller Home Price Index

The official name of this closely-watched series is the S&P CoreLogic Case-Shiller Home Price Indices, which tracks changes in the value of residential real estate nationally and in major cities. Developed in the 1980s by economists Karl Case, Robert Shiller and Allan Weiss, the indices are considered a more accurate picture of home price trends than monthly median prices, because they compare sales of the same properties over time.

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