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Was it this one ? (lack of FT subscription cuts off part of article)

Latest data show significant cooling in US housing market

https://registration.ft.com/registration/ba...00779e2340.html

Latest data show significant cooling in US housing market

By Krishna Guha in Washington

Published: September 9 2006 03:00 | Last updated: September 9 2006 03:00

The speed of the slowdown in US house price inflation has taken many observers by surprise, including the construction industry and probably at least some members of the interest-rate setting open market committee of the Federal Reserve, the central bank.

According to the National Association of Home Builders, the average new home sale price in July was up only 0.3 per cent on the year before, down from 9.8 per cent in January.

Annual house price inflation for existing homes fell from 12.6 per cent to 1.5 per cent over the same period, the NAHB estimates.

Figures from the government Office of Federal Housing Enterprise Oversight - which adjust for mix of houses being sold - show still substantial year-on-year gains, with prices on average 10 per cent higher during the second quarter.

But even the OFHEO figures show a sharp deceleration, with prices rising during the second quarter at an annualised rate of only 4.7 per cent.

James Lockhart, OFHEO director, said recently "these data are a strong indication that the housing market is cooling in a very significant way. Indeed, the deceleration appears in almost every region of the country".

At present, on the OFHEO numbers, only five states have seen outright price declines: Maine and Massachusetts, in the overheated north-east, and Indiana, Ohio and Michigan, where the local economies are struggling.

But the stock of unsold homes has mounted nationwide, raising the risk that house prices could begin to fall more generally. There is widespread agreement that the rise in interest rates from 1 per cent to 5.25 per cent is the main cause of the housing market slowdown.

Now the Fed has to deal with the uncertain consequences. Its last set of minutes referred to "considerable uncertainty regarding prospects for the housing sector" as "a downside risk to the outlook for growth".

The broader economy is supportive, with low unemployment and surprisingly strong wage growth in the first half. However, the unusually high proportion of buy-to-let investors, and of exotic mortgages with step-up payments, in recent years creates additional risk.

Also see this from Richard Beales (FT) arguing the Fed will not (or can not) raise rates again this year:

The fourth issue on my list is the sharply slowing housing market. Were it not for this, signs of wage inflation this week - along with other data hinting at upward price pressures and the Fed's stated view that recent inflation indicators have looked uncomfortably high - might have countered worries over the economy. But housing activity has plummeted and home prices are now scarcely rising even on average after years of strong gains. The spectre of falling prices, negative equity and shattered consumer confidence - leading to much lower spending - is hovering over the Fed.

Critics of Alan Greenspan, the former chairman, contend that by easing monetary policy to soften the impact as a series of bubbles burst, he simply created conditions for the next one. By this logic, a housing bubble, fuelled by low interest rates, was the cure for the collapse of the technology bubble. The Fed is now worriedthat housing is the big potential downside to the economy. Raising rates could make matters worse by reversing the break some home owners have been given by a recent decline in mortgage rates.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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