There are several important real estate market metrics today. If we are talking about the United States, these are Building permits, Housing Starts, New Home Sales, Existing Home Sales, and Pending Home Sales. These economic metrics are often not highlighted in economic calendars, but they are the most important parameters reflecting the state of the real estate market in the country.
Building Permits represent government approval or permission to work on construction projects for new private residential units legally. It is considered a leading indicator. For example, tracking this parameter would have foreseen huge problems in the US real estate market in 2008. Building permits in the United States declined for three years in a row from 2006 to 2009, reaching a low of 513,000 in March 2009, which ended up bursting the housing bubble. The Building Permits report is published by the Census Bureau once a month. Usually in the middle of the month.
Housing Starts measure the change in the annualized number of new residential buildings that began construction during the reported month. It is also a leading indicator of strength in the real estate market. The Housing Start report is published by the Census Bureau once a month. Usually in the middle of the month.
The New Home Sales report contains data on new homes sold, shown in thousands of homes and broken down by geographic region of the country. The report also tracks the percentage change in the number of homes sold from month to month, as well as details on sales prices, the stage of construction at which new homes are sold, and several other factors. The indicator is considered a lagging indicator. The New Home Sales report is published by the Census Bureau monthly. Usually at the end of the month.
The Existing Home Sales report measures the annual number of previously-owned single-family houses that were sold in the previous month. The indicator is considered a lagging indicator. The Existing Home Sales report is published by the National Association of Realtors once a month.
The Pending Home Sales report measures the number of pending deals on single-family houses. A pending sale status means the seller has accepted an offer from a hopeful buyer, but the deal hasn't closed yet. This data can be used as a leading indicator of future home sales. The Pending Home Sales report is published by the National Association of Realtors once a month.
Why is it important for traders to follow Real Estate economic indicators meetings?
Because tracking these indicators allows for a 90% assessment of the state of the real estate market. The Real Estate Market is a good indicator of the state of the economy. An increase in home sales (both new and existing) in connection with an increase in Housing Starts and Building Permits is a sign of economic stability and prosperity. Falling real estate parameters are the first signs of impending economic problems, as consumers can't afford to make big purchases. That means there are reasons for falling wages, rising unemployment, rising interest rates, or other economic indicators.
Suppose the economic conditions in the country are attractive, low-interest rates, growth of GDP, growth of wages, and reduction of unemployment. In that case, all this will encourage consumers to make large purchases, such as real estate. Conversely, declining economic indicators, falling GDP, rising interest rates, and rising unemployment - all these factors will create conditions to save money, and the real estate market will fall.
But it is very important to track these economic indicators together to have the fullest possible picture of the real estate market. And remember that rising interest rates, which are happening now, will have a negative impact on the real estate market.
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