According to preliminary data released by the U.S. Census Bureau, for the second time in the past three months, the trailing twelve month average of new home sale prices declined.
In April 2014, the initially reported figure for the median new home sales price was $275,800, down from the revised figure of $281,700 in the previous month. More significantly, the trailing twelve month average of median new home sale prices, which allows us to minimize the effects of seasonality in the housing data, fell from $268,583 in March 2014 to $268,292 in April 2014.
The last time the trailing twelve month average of median new home sale prices declined was in June 2012, right before the second U.S. housing bubble began to inflate.
So what might that mean for the U.S. economy?
Historically, for the 605 months through April 2014 for which we have trailing twelve month data (or rather, from December 1963 through April 2014), there are 103 months in which the trailing year data for median new home sale prices fell from the preceding month. 42 of those months coincided with periods of outright economic contraction in the U.S.
The average economic growth rate for the 103 months of declining median new home sale prices is 1.0%. The average economic growth rate of the remaining 402 months is 3.5%.
According to the National Association of Home Builders, new housing construction (residential investment) typically makes up about 5% of GDP. Over the last four quarters, it has accounted for an average of 3.1% of the nation's GDP.
We think that housing prices are a coincident-to-slightly-lagging indicator of the relative health of the U.S. economy - it's something that tends to be in sync with the overall state of economic conditions in the U.S. As such, housing prices are confirming something we already know - the U.S. has been experiencing recessionary conditions in early 2014.