A hat tip to Calculated Risk for this article by Danielle DiMartino Real estate indicator gets notice [Dallas Morning News].
While I always thought of most housing stats as trailing economic indicators, apparently a number of economists have correlated GDP with new housing starts. There may be a 3 quarter lag between the two indicators.
Mr. Kasriel takes the Rosenberg analysis one step further by plotting the quarterly average observations of the year-over-year change in economic growth against the year-over-year change in new-home sales, which he then advanced by three quarters. This three-quarter advance yielded the strongest correlation to gross domestic economic growth.
“In other words, as pointed out by Mr. Rosenberg, the behavior of new-home sales is a powerful leading indicator of overall economic growth,” Mr. Kasriel wrote.
Calculated Risk says New Home Sales is one of my favorite leading indicators of future economic activity. The one exception, the 2001 recession, was due to a dearth of business investment after the burst of the stock market bubble. For the consumer led recessions, New Home Sales has been an excellent leading indicator.
While I also have used GDP to correlate to housing prices [Curbed], I am not sure if its going to work in 2006 with all the economic noise from last fall showing weak growth.
Economists never rest. [yawn]