Calculated Risk

A hat tip to [Calculated Risk](http://calculatedrisk.blogspot.com/2006/04/dimartino-housing-as-leading-indicator.html) for this article by Danielle DiMartino [Real estate indicator gets notice [Dallas Morning News]](http://www.dallasnews.com/sharedcontent/dws/bus/columnists/ddimartino/stories/DN-dimartino_10bus.ART.State.Edition1.90d5e2f.html).

While I always thought of most housing stats as trailing economic indicators, apparently a number of economists have correlated GDP with new housing starts. There may be a 3 quarter lag between the two indicators.

>Mr. Kasriel takes the Rosenberg analysis one step further by plotting the quarterly average observations of the year-over-year change in economic growth against the year-over-year change in new-home sales, which he then advanced by three quarters. This three-quarter advance yielded the strongest correlation to gross domestic economic growth.

_”In other words, as pointed out by Mr. Rosenberg, the behavior of new-home sales is a powerful leading indicator of overall economic growth,” Mr. Kasriel wrote._

Calculated Risk says _New Home Sales is one of my favorite leading indicators of future economic activity. The one exception, the 2001 recession, was due to a dearth of business investment after the burst of the stock market bubble. For the consumer led recessions, New Home Sales has been an excellent leading indicator._

While I also have [used GDP to correlate to housing prices [Curbed]](http://www.curbed.com/archives/2005/09/28/three_cents_worth_gdp_as_a_pdg_real_estate_indicator.php), I am not sure if its going to work in 2006 with all the economic noise from last fall showing weak growth.

Economists never rest. [yawn]