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Is the Housing Market Improving?

After housing indicators showed positive growth signs for the housing market last month, the first housing numbers released this month, from NAHB/Well Fargo, reported their third consecutive decline in their housing market index (HMI), with a decrease of two-points to 44. A suffering housing market suggests a struggling economy.

The chart below shows the drastic fall in the housing market resulting from the recessions, and shows the recent recovery the housing sector has enjoyed since 2011. The highlighted section shows the current dip in the HMI.

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NAHB Chairman Rick Judson explained the reason for the fall in the HMI by saying, “Although many of our members are reporting increased demand for new homes in their markets, their enthusiasm is being tempered by frustrating bottlenecks in the supply chain for developed lots along with rising costs for building materials and labor. At the same time, problems with appraisals and credit availability remain considerable obstacles to completing deals.”

Last month, only the NAHB/Wells Fargo HMI numbers declined.  All other key housing indicators: FHFA and S&P home prices, the Census Bureau’s housing starts all grew. It will be interesting to see if the supply chain bottlenecking or credit availability, explained by Chairman Judson, affects these other market indicators as it has the HMI.

The other key indicators are to be released later this week and early next week.

The housing market recovery plays an important role in US economic growth, and acts as a gauge for the strength of the recovering economy. A strong housing market translates to a superior economy.

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