Some context to the housing market / by Todd Yarbrough

Housing prices are rising, which means that we're beginning to hear concerns about a new housing bubble. And while the term housing bubble can mean many things to many people, I would imagine most would agree that 2005-2007 was indeed a housing bubble and the subsequent recession a by product of that hysteria. And this means that we can at the very least, and indeed this is a extremely shallow "analysis" of the current housing market situation, use housing data before and after the housing boom to set appropriate anxiety levels about the current housing market situation. Below is from newly released data by the St. Louis Federal Reserve FRED:

fredgraph.png

As you can see, housing construction seems to drive the bubble back in 2007. Rates of completed homes and non-starts do increase during this period, but construction carries the trend. Completed homes actually recover right at the beginning of the bubble popping, but very quickly turn downward. 

Looking at the most recent data we see that construction is steadily increasing, but isn't even back to pre-bubble levels. Both completed homes and non-starts are relatively constant with non-starts increasing somewhat. 

With the Federal Reserve set to raise rates two more times this year I can't see how we would be much worried about a housing bubble. The housing market seems healthy at the moment, at least with respect to the above delineation of data. In fact there is probably an argument that raising rates will tame the market just as it is ready to really take off. Bad for economic growth, but perhaps good for economic stability.