US: How vulnerable is the housing market? - NBF

Krishen Rangasamy, Research Analyst at National Bank Financial, points out that the US housing data has been relatively weak this year as sales of both new and existing homes have been trending down, coinciding with the ramp up of interest rates.

Key Quotes

“Ditto for housing starts whose downtrend is not surprisingly hurting home builder confidence ─ the NAHB index indeed sank to a two-year low in November. Those trends look eerily similar to those observed back in 2006, or just before the U.S. housing market collapsed.”

“So, should investors be concerned about the U.S. housing outlook? To be sure, a house price correction can never be ruled out, especially if, as we expect, economic growth and employment creation pace down next year. But in our view, a housing crash à la 2007-2011 is unlikely anytime soon.”

“Our optimism rests on the quality of mortgage originations in recent years.”