The FRED Blog has discussed how mortgage interest rates affect decisions in the housing market and how the construction of new housing slowed down after the 2007-2009 Financial Crisis. Today we examine the cycles in sales and new construction.
The FRED graph above shows the percent change from the preceding year in the quarterly number of new single-family houses sold (the orange bars) and in the number of housing starts (the blue bars), which represent new single-family homes under construction. You do not see much of a difference between the two sets of bars because growth in house sales frequently coincides with new housing construction—a.k.a, housing starts. That suggests that a booming (or contracting) housing market rapidly increases (or decreases) new residential building activity.
But building a new house is a time-consuming endeavor and it takes several months to finish a construction project and put a new house on the market. The