[ARCHIVE] Make Your Move

Mixed Signs for the Housing Market

On the surface, data coming out of the housing market paints a very positive picture.  Annual Existing Home Sales grew to their highest level in five years in July, and similarly, annual Housing Starts are at levels not seen since late 2008 – both trends fueled by stronger overall economic growth.

However, our job is not just to scratch the surface, and when we look a little deeper, we see a key piece of data that tells us that housing’s run-up will soon be ending.  The Housing Affordability Index has now declined for the past five months and is now at its lowest point since July 2010.  This tells us that more potential buyers are getting priced out of the market. 

Affordability will continue to erode in the coming months as the pace of job (and income) growth remains slow, and mortgage rates trend higher.  Prices, as measured by the annual Case-Schiller 20 City Composite Index, are 6.3% higher than last year, while Disposable Personal Income is up only 1.5%.  Slowing affordability and higher prices will eat away at the gains made in the housing market.  Readers tied to residential construction should keep these weak underpinnings in mind when planning for next year.  

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