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Summary

  • The main determinants of housing demand in the short run are the level and direction of mortgage rates and the strength of the job market.
  • Homebuilders have responded to the drop in new home sales by reducing housing starts, and this response is likely to continue this year, until new home sales finally rebound.
  • The housing market – and the overall economy – will be healthier over the long run if house price appreciation moves closer to increases in personal income.

In last week’s discussion, we looked at last year’s performance of the US housing market and the forces that shaped that performance. This week, we look at the forces that should shape the housing market for

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