This week we got the NAHB Housing Market Index for April - a key gauge of US housing market health. The index fell slightly to 68 (vs 71), but as the chart below shows it's still at solid levels, having gone through a lengthy recovery following the housing market collapse in 2007. But despite that optimistic signal I would flag the jump in rates which has put affordability under pressure at the same time as wage growth and jobs growth have collectively topped out. Unless something changes on either front (lower mortgage rates/bond yields or an acceleration in wage growth) the weaker "housing market fuel indicator" will continue to wave a downside risk flag for what is a major sector of the US economy.
Home builders remain optimistic on the housing market - no early warnings to speak of on this front.
The housing market fuel indicator combines affordability factors (prices vs mortgage rates) and income factors (wage and jobs growth), and is currently flagging downside risks.
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