Meet the Author

David E. Altig |

Vice President

David Altig was formerly vice president and associate director of research at the Federal Reserve Bank of Cleveland. Dr. Altig’s research is primarily focused on monetary and fiscal policy issues.

Meet the Author

Brent Meyer |

Economist

Brent Meyer

Brent Meyer is a former economist of the Federal Reserve Bank of Cleveland.

01.02.07

Economic Trends

Housing

David E. Altig and Brent Meyer

It is never a good idea to read too much into a few months worth of data, but some signs that we may have seen the worst of the downturn in the residential housing market are providing a few straws for the optimistic to grasp. Both new and existing home sales for November exceeded expectations, and year-over-year growth rates are, arguably, showing signs of having bottomed out.

Single-Family Home Sales

Sources: U.S. Department of Commerce, Bureau of the Census; National Association of Realtors.

Furthermore, inventories of unsold homes, though still on the high side, appear to be retreating.

Month’s Supply of Single-Family Homes

Sources: U.S. Department of Commerce, Bureau of the Census; National Association of Realtors.

If you are operating on the theory that the real problem resides in falling housing values (and what that might mean for consumers’ balance sheets and spending behavior), it is clear that rapid appreciation of the previous four years is done. But the actual amount of price depreciation has been relatively modest compared to the 25 percent to 30 percent appreciation enjoyed from 2002 through 2005.

Median Prices: Single-Family New and Existing Homes

Sources: U.S. Department of Commerce, Bureau of the Census; National Association of Realtors.

Those bits of light notwithstanding, there is still of plenty to keep the pessimists in bad humor. Housing starts and permits—the latter being a component of the Conference Board’s index of leading indicators—are still signaling weakness, despite the recent uptick in starts:

Housing Starts and Permits

Source: U.S. Department of Commerce, Bureau of the Census.

You may keep your brow furrowed, if you wish.