When you choose to look at real estate as forex trading indicator, you need to focus on New Residential Construction Report.
Housing Starts – Forex Trading Indicator
This report is issued monthly by the Department of Housing in USA alongside with the Census Bureau. Within the report there is data from surveys regarding home building.
The following 3 characteristics are examined:
1. Amount of new housing constructions (“Housing Starts”)
2. Number of building licenses issued
3. Amount of house completions
The given data is sorted by geographical sectors (north, east, south, west) to show the regional variations.
Real Estate – Economic Indicator
In order to calculate US Leading Index, the data from building licenses and new housing constructions are used as the leading indicators. The growth in the construction industry shows the growth in business cycle.
In forex trading, real estate indicators is needed to calculate other indicators that are based on consumer statistics. For example, with a purchase of a new home, there are other expenses such as gardening supplies, furniture, kitchen appliances, insurance etc.
In case Federal Reserve increases interest rates, the housing market usually slows down a notch due to mortgage rates that rise accordingly. This consequently slows down the new housing construction and in some cases, stops the new addition to real estate all together.
In order to see a clear trend in real estate, it is important to analyze the patterns formed. Do not focus on specific monthly numbers because the trend won’t be obvious from those. Keep in mind that typically this report doesn’t make the market volatile, however it helps to focus on other consumer-based indicators.
For those of us highly interested in the development in real-estate, this indicator can be very useful in forex trading. Since the survey covers data from almost the whole US, it gives pretty clear picture to identify business cycles.
Real-estate charts show the health of the local housing market. Home sales and prices tend to go up or down based on yearly seasons, however the overall long-term charts can uncover trends compared to previous year.
Housing Starts report is usually released around 17th of each month by US Census Bureau and covers previous month’s data. Housing starts is best used as a business cycle indicator and a tool for forex traders to understand real estate markets.