Monday, October 19, 2015

Apart from ECB Day it’s all about housing this week | ... but housing can be a confusing economic indicator

While on Thursday we can look forward to the ECB monetary policy statement and press conference, which should give us more to think about in terms of possible additional Eurozone easing, the rest of the week is dominated by housing stats from various jurisdictions. Yesterday saw the UK Rightmove House Price Index, which showed a slowing growth in house prices both year-on-year and month-on-month. In the US, the National Association of House Builders Housing Market Index indicated some growth, up from 62.00 previous and expected to 64.00 yesterday.

Later today sees Housing Starts and Building Permits in the US, which can move the Forex market, while tomorrow MBA Mortgage Applications figures will provide a leading indicator of the health of housing stateside. Then, on Thursday, just when we will be absorbing the thoughts of Mr. Draghi, the US Housing Price Index will be released, as well as Existing Home Sales.

Housing can be a confusing economic indicator

It is a truism to say that there is no such thing as an homogenous national housing market. Each city and geographical area constitutes a separate marketplace. Therefore we can see dramatic price increases in favoured urban areas, while in the same country regional variations can give a completely different impression.

The ease with which investors can obtain loan finance can also distort the picture. This aspect has come to the fore in Australia with the recent rise by Westpac in its variable mortgage rate, which is expected to assist the monetary authorities in their desire to reduce core interest rates. These rates have tended to remain high in spite of good economic reasons for their reduction by a fear of exacerbating a housing bubble, particularly in cities.

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