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Tuesday, April 28, 2015


The effect of housing sector indicators on a currency is little complex to understand. In different economic situation housing indicators explain the health of the economy. Inflation, interest rate and housing sector indicators are closely related.

An economy that has lower interest rate, it means the economy should have higher inflation hence the higher home price index. Higher home price may decrease the home sales indicators,but because of the lower interest rate the home sales indicators may also increase. 

On the other hand if an economy has higher interest rate, the economy will have lower inflation rate and home price. Lower home price should increase the home sales, but higher interest rate should decrease the home sales.

Following are some of the most important housing sector indicators:
  • Housing Starts: Housing starts is the number of residual contractions started in a particular month. The indicator is greatly effected buy the weather. In strong economy, people are more likely to buy new homes,conversely, in a weak economy people are less likely to buy new homes.
  • Building Permits: Authorization by a regulatory body to start the construction of a new or existing building.This indicator actually indicates the demand for new homes.
  • New Home Sales: Sales of newly constructed residences.This indicator indicates the actual home sales taken place.
  • Pending Home Sales: Home sales contracts are made but the sales are not closed yet. This indicator also indicates the demand for new home.
Healthy housing sector indicator indicates a strong economy and a strong currency. All of the above indicators are not available for all currencies. 

If an economy has higher interest rate and healthy housing sector, it means people have higher income. If an economy has lower interest rate but poor housing sector, it means the economy is struggling.

Advance fundamental analysts not only consider the figures of the housing sector indicators, but also consider the economic situations.

Dear Traders, if you have any question, you can drop a comment bellow.

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