MARKET ANALYSIS
HOUSING
Housing regards a trio of areas; housing starts and sales, housing asking price changes and mortgage approvals.
Housing Starts and Building Permits are closely watched by economists and investors as related factors associated with construction, such as financing and employment, are all important economic features. These two can indicate the state of the economy in the near future.
Other indicators linked to this area are New Home Sales and Existing Home Sales.
Housing price index changes and mortgage approvals are both published monthly and are considered to be important indicators about the state of the housing market in the UK.
A rising number of mortgage approvals would usually indicate a growing or healthy housing market which should in turn lead to an increase in housing prices due to the expected rise in demand.
NEW HOME SALES
Country
Type
Housing
Announced
Monthly, around 25 days after the month end
Description
This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house.
Furthermore, this narrow piece of data has a powerful multiplier effect through the economy. By tracking new home sales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio.
Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and the realtor. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase.
Thus, trends in the new home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies – and therefore this indicator can be helpful to those investors interested in placing a financial spread bet on these particular types of companies.
EXISTING HOME SALES
Country
Type
Housing
Announced
Monthly, around 20 days after the month end
Description
The construction industry provides information on construction output and activity. This figure represents the annualised number of existing single-family home sales over a one-month period and is released monthly by the U.S National Association of Realtors.
It does not take into account newly built houses and can be viewed as a lagging indicator as it tends to react after a change in mortgage rates. However, it is thought to be a good measure of demand in the real-estate sector.
HOUSING STARTS
Country
Type
Housing
Announced
Monthly, around 17 days after the month end
Description The construction industry provides information on construction output and activity. Such information gives an insight into the supply on the housing and construction market.
Rising numbers of new construction starts or value of construction completed reflects higher consumer and business optimism.
Expanding construction indicates growth in the housing market and predicts an increase in the overall economy.
However, an excessive supply of new buildings may result in a drop in housing prices. The construction industry is one of the first to go into a recession when the economy declines but also to recover as conditions improve.
HOUSE PRICE INDEX
Country
Type
Housing
Announced
Monthly
Description
There are a number of house price indices produced monthly in the UK.
The Halifax House Price Index is the UK's longest running monthly house price series with data covering the whole country going back to January 1983. The Index is based on the largest monthly sample of mortgage data, typically covering around 15,000 house purchases per month, and covers the whole calendar month. From this data, a "standardised" house price is calculated and property price movements on a like-for-like basis are analysed over time.
Nationwide uses a statistical method, which simulates the ideal procedure. This allows Nationwide to use the constantly varying sample of mortgage approvals to produce a consistent index. Any changes are simply due to price fluctuations and not due to changes in the balance of the sample. For example, an increase in the proportion of flats and small houses could produce a fall in the simple average price, although the price of every property in the sample might actually have increased.
The area of land included with the property is felt to be unimportant when valuing a property. Large acreages of garden land have surprisingly low intrinsic value unless planning permission is available for further development.
Rightmove is the UK’s earliest report on housing but tends to produce a minimal impact because seller’s asking prices and the actual sell price are not always correlated.
The figure is compiled from sellers’ asking prices of properties as they come onto the market via Rightmove’s member estate agents which it claims covers over 90% of the market. Therefore the figure is perceived to be in a good position to identify any immediate changes in the market. The index is not adjusted to seasonal changes.
MORTGAGE APPROVALS
Country
Type
Housing
Announced
Monthly, around 24 days after the month end
Description
The number of mortgages approved monthly by members of the British Bankers Association. The figure shows the turnover effect happening in the sector.
This is considered to be a leading indicator of the state of the housing market in the UK with a rising number of approvals indicating a growing or healthy housing market with a declining number detailing the opposing effect.
