The housing market has a huge impact on the global economy. In the United States, during the last run up, it accounted for almost 40% of the economy. Today, it is a lower amount yet still makes up a significant part of the overall market.
One of the areas that it has the most impact is jobs. The record low unemployment rate is, in large part, due to a housing market that saw 7 years of growth.
But where will it go from here?
This is the question that is on the minds of all market watchers.
A slow down in housing is agreed to have enormous effects on the global economy. Recently, there are signs that things might be slowing. Some of the markets that were on fire, London as an example, experienced a number of headwinds the last year.
In the latest earnings call, the CEO of Redfin cast a gloomy outlook for housing over the next couple months. It is his belief that housing will continue to slide the next couple months. While July was a good month, he said the signs are showing trouble already for August. This is important since Redfin is a West Coast real estates, a section of the country that is extremely important for the overall numbers.
“For the first time in years, we are getting reports from managers of some markets that home buyer demand is waning, especially in some of Redfin’s largest markets,” Kelman said, specifically calling out Seattle, Portland and San Jose as areas where inventory was still tight but did not seem to be pushing prices higher still.
Demand is what always lead the charge.
Even though supply remains tight, this firm is seeing less demand. This is a huge red flag for a market that was experiencing a bidding war only last year.
This viewpoint is countered by the Chief Economist at Regions.
His view is that housing starts are continuing to rise. The growth rate in this field is hindered by a lack of skilled labor. His belief is that lean supply is the cause of the woes.
The Commerce Department will release the July housing starts report on Thursday at 8:30 a.m. Eastern.
Economists surveyed by MarketWatch expect housing rates to rise 8% in July after a dramatic 12.3% drop in the prior month. Moody noted that housing starts also had a decent 4.8% rise in May.
Obviously, this is in direct contrast to what the CEO for Redfin believes.
If demand is slowing, is supply even an issue?
That is a question that remains to be seen. Others believe that the pace of housing starts is going to slow as we move forward.
The tentacles of this sector a long. Because of the sheer numbers used, housing is a big impact economically. Tens of millions depend upon it, either directly or indirectly. A slowdown of any significance will cause a major pullback in most markets. This is what we witnessed a decade back.
While the market did not reach the fevered bubble pitch of the past, it is a long running bull. There still could be a couple of years left in this run yet it is worth watching.
The multi-billion dollar question now is which way will it go?