The economy continues to run at an “average” pace of growth, while the housing market is not experiencing the usual spring improvement. Despite sales that are generally below expectations, almost all housing market indicators exceed their historical averages.

The Rising Cost of Oil

Because some people have raised concerns that high oil prices will lead to a recession, we did some additional research on oil prices this month. Oil prices have historically been a good leading indicator of economic growth because both businesses and consumers are impacted significantly by oil prices.

The recent increase in oil prices is significant, but pales in comparison to oil prices in the early 1980s — both in terms of current dollars and in terms of the rate of increase.

Adjusted for inflation, current crude oil prices still lag those of the early 1980s. In current dollars, crude oil hit at peak of nearly $97 per barrel in April 1980.

Economic Growth: C

Job growth in March was above expectations, and more than 2.1 million jobs have been added to the economy in the last year. Retail sales increased 6.7 percent in February over the previous year. Inflation remained flat at 2.1 percent. Personal income growth declined slightly to 5.6 percent, and remains below its historical average of 7.4 percent.

Leading Indicators: C-

The leading indicators we track show mixed results. The leading indicator index is up 2.9 percent on an annualized basis over the last six months, down from the previous month’s value of 3.5 percent. The rate on the 10-year Treasury rose to 4.69 percent, and the rate on the 2-year Treasury rose to 4.71 percent, meaning a negative yield curve. A negative yield curve is usually a precursor to a recession. The stock market returned to positive territory in March, and the S&P 500, NASDAQ and Wilshire 5000 each have posted double-digit returns over the last 12 months. Builder stock prices have risen 5 percent over the last 12 months, as measured by the S&P Super Homebuilding Index.

Mortgage Rates: B

At month’s end, both fixed and adjustable rates had risen from February. The average fixed mortgage rate rose to 6.35 percent, and the one-year adjustable mortgage rate rose to 5.51 percent. The spread between the two has narrowed for 12 months in a row. The percentage of loans with an adjustable rate fell to at 28.7 percent in March.

Consumer Behavior: C+

Consumer confidence jumped to 107.2 in March. The consumer sentiment index and consumer comfort index also increased during the month.

Existing Home Market: B+

Existing home sales rebounded in February, following two months of decline. The annual sales volume increased to 6.9 million sales per year, with increases in each region of the country except the South. The median existing home price fell to $209,000. The inventory of existing homes remained flat at 5.3 months. The pending home sales index rose in February, reaching 117.7.

New Home Market: C+

The new home market is showing signs of slowing, as annualized new home sales fell nearly 11 percent in February to 1.08 million units, and were down 13 percent from one year ago. The median new home price fell to $230,400. The housing market index decreased to 55 in February, just slightly below the historical median. The supply of unsold homes jumped to 6.3 months, its highest value in 10 years.

Housing Supply: B-

Annualized housing starts decreased to 2.12 million in February, which is down 8 percent from the revised January numbers and down 5 percent from February 2005. Single-family starts fell 2 percent for the month to 1.8 million. Single-family permits fell 3 percent from January to 1.64 million, and total permits fell to 2.15 million.

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

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.
Thank you for subscribing to Morning Headlines.
Back to top
Inman Connect is LIVE next week! Join us and thousands of your peers from wherever you are.Register Today×
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