Author Topic: One underappreciated economic indicator is deeply negative  (Read 65 times)

0 Members and 1 Guest are viewing this topic.

Offline Ptarmigan

  • Bunny Slayer
  • Hero Member
  • *****
  • Posts: 22379
  • Reputation: +760/-225
  • God Hates Bunnies
One underappreciated economic indicator is deeply negative
« on: September 18, 2022, 09:26:55 PM »
One underappreciated economic indicator is deeply negative

One housing indicator bodes especially poorly for the economy.

Homebuilder confidence, which gauges the market conditions in the single-family construction space, has plummeted over the past few months as the housing market takes a beating and appears to now be facing recessionary conditions.

“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” said National Association of Homebuilders Chief Economist Robert Dietz. “The total volume of single-family starts will post a decline in 2022, the first such decrease since 2011."

Inflation has rattled the economy, surging to 8.3% as measured by the consumer price index’s latest reading. The too-high inflation has triggered a chain reaction, beginning with the Federal Reserve raising interest rates, that has now filtered down to residential construction through higher mortgage rates.

The construction industry is a good gauge of the overall health of the economy and can be an early indicator of recessions because of how many jobs it supports and how many goods are used in the construction process. Adam Graham is a construction industry analyst at Fixr, a company that specializes in home improvement and remodeling resources. He contends that homebuilder confidence is a crucial metric of the health of different market segments.

The Builder Confidence is low.

About 1 in 5 of the homebuilders surveyed reported slashing prices in the last month to limit cancellations or increase sales, while nearly 70% blamed rising interest rates for declines in housing demand.

“This is a very clear signal from the people who make their money from building homes that we are in or about to enter a housing downturn,” said Graham.

A lot of that dwindling homebuilder confidence is coming from rising mortgage rates. When the Fed raises its interest rate target (which is a different, very short-term rate), mortgage rates also increase. Mortgage rates ballooned over 6% for the first time since the Great Recession this week.

The average 30-year fixed-rate mortgage is now 6.02%, up more than 3.1 percentage points from a year before, according to Freddie Mac. That is a 0.13-point jump in the past week alone.

It was low from 2008 to 2012.
Never interrupt your enemy when he is making a mistake.
-Napoleon Bonaparte

Allow enemies their space to hate; they will destroy themselves in the process.
-Lisa Du