New NAHB number out today

While the index has dropped again, this is not much of a leading indicator. The last housing crash started around 1987 and lasted about 5 years. Currently the NAHB index is still high compared to it's average level.

NAHB chief economist David Seiders adds: "The HMI is down from its most recent cyclical high of 72 in June of last year, and reflects growing builder uncertainly on the heels of reduced sales and increased cancellations related to eroding affordability as well as an ongoing withdrawal of investors/speculators from the marketplace"

But just as concerning to many builders is the potential for more monetary tightening by the Federal Reserve that could drive interest rates, and thereby homeownership costs, even higher. Ironically, the Feds inflation-fighting moves have helped firm up the rental market and raise the owners equivalent rent components of the core inflation measures that the Fed is seeking to contain Seiders added.

~

I'm not sure I agree with Seiders comments on the rental market - I think rates were going to move up there regardless of interest rates simply to reflect the higher housing prices. On a real basis, the rate of return for multi-family is still lower then it was during most of the 1990's (REIS, TWR). This is because in recent years the cost of multi-family buildings has moved up while the rental rate has stayed the same.