The second housing report came out today with another 10% off housing prices since a year ago. This is problematic because it raises the question of where the growth will come from to pay for the imminent Wall Street bailout. Home value is the most significant way for citizens within the US to build wealth. When housing loses value, the subsequent chain of events create disruptions in equities, credit markets and ultimately currency values.
The first housing report we are talking about is released by the Census Bureau and shows the sales rates and average prices for new home builds. This is a number that is included in GDP but is several times smaller than the larger and more economically significant existing home sales number. The existing home sales report is released by the National Association of Realtors and unlike its cousin, released by the Census Bureau, existing home sales are not included in GDP and is therefore often ignored in policy debates.
Both reports showed a significant decline in the number of homes sold as well as a 6% and 10% decline in sale prices respectively. That means that individuals in the US are still losing home value and wealth. That will be a drag on the economy and should depress equity prices. This is relevant for currency traders as we continue to use stock prices as a way to forecast the value of the JPY.
- This is a key release for stock and currency traders. If you are interested in learning more about trading the forex, click here:
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