The housing market has been so hot for so long that it is easy to forget that new-home sales is a seasonal business. While the peak sales month occurs in March, there is usually a 28 percent decline in sales from August through December. The seasonally adjusted figures from the Census Bureau take this seasonality into account.

The housing market is going through its usual seasonal slowdown this year.

The housing market has been so hot for so long that it is easy to forget that new-home sales is a seasonal business. While the peak sales month occurs in March, there is usually a 28 percent decline in sales from August through December. The seasonally adjusted figures from the Census Bureau take this seasonality into account.

The housing market is going through its usual seasonal slowdown this year. New-home builders, which have migrated more to the higher-priced segments of the market, are experiencing more than a 28 percent decline, as higher-priced home sales typically slow down more because their buyers have children in school.

Our grading system of the economy and the housing market is a “bell curve” model, with statistics at an all-time high receiving an “A,” statistics near the long-term average receiving a “C,” and the worst times ever receiving an “F.” In this grading system, it is OK to be a “C” student.

Here is our current report card:

Economic Growth: C

The economy slowed a little, as retail sales continue to decline from July’s 6-year high, and job growth slowed. Employers have added 1.9 million new jobs over the last year, a growth rate of 1.4 percent. The last time the employment growth fell below 2 million was September 2004. Inflation declined slightly to 2 percent, which is still well below its historical average of 4.2 percent.

Leading Indicators: C

The leading indicator index is up 0.9 percent on an annualized basis over the last six months. The spread between the 10-year Treasury index and the Federal Funds rate widened slightly to 0.55 percent. The stock market picked up speed in October, with the stock market indices we track (Dow Jones, S&P 500, NASDAQ and Wilshire 500) each retuning between 4 percent and 9 percent on an annualized basis. The S&P Super Homebuilding Index fell 13 percent during the month and has now returned 30 percent over the last 12 months. This month, stocks are continuing to decline.

Mortgage Rates: B+

Both fixed rates and adjustable rates rose in October, though the spread between the two continued to narrow for the seventh consecutive month, to 124 basis points. The average fixed mortgage rate rose to 6.15 percent, and the one-year adjustable mortgage rate was 4.91 percent at month’s end. The percentage of loans with an adjustable rate stood at 29.5 percent at month’s end.

Consumer Behavior: C+

Consumer confidence continued to fall in October, to 85, its lowest value since October 2003, as consumers deal with high gas prices, the after effects of recent hurricanes and a weakening labor market. Consumer sentiment also fell during the month to 74.2. Apparently, the plunge in confidence caused by Katrina is having more of a lingering effect than the plunge caused by most disasters.

Existing-Home Market: A-

The NAR Median Home Price fell in September to $212,000. Annual sales volume remained flat at 7.3 million sales per year, with an increase in the South and declines in the Midwest and West. The inventory of existing homes remained flat at 4.7 months. The pending home sales index remains very strong at 128.8.

New-Home Market: B

Annualized new-home sales in September increased to 1.22 million units, and the median new-home price fell slightly to $215,700. The Housing Market Index rose to 67 in October, returning to its pre-Katrina level. The supply of unsold homes remained flat at 4.9 months.

Housing Supply: B-

Annualized housing starts increased to 2.11 million in September, with single-family starts increasing 2.6 percent to 1.74 million. Starts increased 6.9 percent in the South, 1.9 percent in the Midwest and were flat in the Northeast and the South. Single-family permits increased 4.4 percent to 1.75 million units. Housing starts is a very volatile statistic, as weather or other factors can make a significant impact.

John Burns is the founder of Real Estate Consulting in Irvine, Calif., which monitors changes in real estate market conditions and provides consulting services, including strategic planning, market research and financial analysis.

***

What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×