This week we saw the release of the latest housing starts data for the month of December, and a little later today we will get the release of data on existing home sales. The starts report showed a continued decline in activity, with new ground-breakings having now fallen for 8 of the last 12 months. Furthermore, there has been a continued surge in cancellations, as higher mortgage rates and building costs have made new builds prohibitively expensive for many. For example, KB Homes—one of the nation's largest homebuilders—announced a stunning 68% cancellation rate, compared to 13% in the same quarter of 2021.

Given this sector has such a high multiplier effect on the rest of the economy, it is extremely important for economic growth. In this Economics Weekly, we take another snapshot of the current housing market, with the view that while cyclical activity continues to slow and further price declines are likely, there are still strong structural underpinnings for the housing market and we are not seeing a repeat of the GFC.

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Richard de Chazal, CFA, is a London-based macroeconomist covering the U.S. economy and financial markets.