While the housing market is not always in lockstep with the economy, but it is often a relevant market to consider when analyzing the overall robustness of the economy as a whole; when one is doing well, the other will likely follow suit. As such, many economists view the housing market as a simpler (though still very complex) proxy for the general health of the economy; things such as the total number of home sales, home prices, and mortgage payments (this is a non-exhaustive list) give economists insights into the number of liquid assets the average consumer has available, where the average consumer believes their money is best invested, and to a lesser degree how confident the average consumer is that the economy will maintain its current trajectory. However, small details can provide additional insight into the general well-being of the economy as well.
One interesting measure, that is frequently overlooked, is the square footage of new construction for single-family residences. As a general rule, the average square footage of new homes decreases shortly before the economy hits a recession; this is largely because consumers are squirreling their assets away for a harsh economic winter. Conversely, the square footage increases shortly before economic turmoil is over; this is because those with more assets, facing fewer restrictions on their ability to make large investments, return to the housing market to capitalize on the more-than-likely down housing market.
This general framework is all well and good, but what does it tell us about the economy at the moment? Since the middle of 2015, the average square footage of homes has been decreasing. However, in the beginning of 2019, the square footage of new family residences began increasing; suggesting that the economic instability of 2018 may be ending. While no metric is perfect, this suggests that the housing market will be heating up in the near future; a prediction which is only bolstered by the decreased rates on fixed-rate mortgages.
At the Chernov Team, we know that knowledge is power, particularly when it comes to understanding the housing market and the overall economy. At the Chernov Team, we understand that whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most.
