It is looking more and more like the market for new homes in the U.S. did indeed reach a top in the fourth quarter of 2015.
We base that observation on our calculation of the market capitalization of new homes sold in the U.S., where we've multiplied the average prices of new homes sold by the number of new homes sold, then adjusted the results to account for the effects of inflation as measured by the Consumer Price Index for All Urban Consumers in All Cities. The results of our math are shown in the following chart:
The data for both the price and quantity of new home sales for the most recent three months (December 2015 through February 2016) will continue to be revised over the next several months as more information about the sales of new homes that occurred during these months becomes available.
With data through November 2015, however, we think we can make the call that the growth of the market for new homes in the U.S. has flattened out in real terms.
In nominal terms, however, if we don't consider the most recent months that are still subject to revision, the growth of the market capitalization of new homes in the U.S. decelerated in mid-2015, but has not stalled out.
Which chart between real and nominal data do you suppose is telling a more accurate story about the relative health of the U.S. new home market?
U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 23rd March, 2016.
U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 23rd March, 2016.
U.S. Department of Labor Bureau of Labor Statistics. Consumer Price Index, All Urban Consumers - (CPI-U), U.S. City Average, All Items, 1982-84=100. [Online Application]. Accessed 23rd March, 2016.