The major averages couldn’t hold their early gains, entering the final hour mixed on little news, to begin the week.
The Chicago Fed National Activity Index slipped .1 in September to .17 on weakness in sales, inventory, personal consumption, and housing. The 3-month moving average dropped .06 to .21 indicating more moderate economic growth.
Housing inventory for sale is a key metric to follow to assess the health of the housing market. Sharp gains in inventory over short periods of time, generally less than a year are a very reliable indicator of trouble ahead. Price declines usually follow and can be quite dramatic. As a general rule 6-months of inventory for sale is considered normal with neutral prices. Higher inventory and prices generally fall, lower inventory and prices tend to increase, as seen in the last 10-years or so. Interest rates also exert a strong influence on price trends with lower rates leading to higher prices, while higher rates lead to price declines. Technology had a huge influence of real estate markets, dramatically shortening the time it took to list, finance, and close escrow on a property. This has led to a number of pundits noting that 4-months of inventory is the new normal, with prices neither rising or falling. With the National Association of Realtors or NAR reporting that inventory for sale broke the 4-month level nationally in April, pricing has softened since, particularly in the face of rising mortgage interest rates. While I wouldn’t call it a buyers’ market just yet, it’s certainly moving in that direction.
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