These two charts provide indicators of the region’s housing market. Building permit data provide an indication of the number of new homes being built by estimating the number of permits issued to build privately owned buildings. This number, however, does not equal the number of new homes because some permits are issued months or years before a home is actually built. Building permits are generally considered a leading economic indicator, because they tend to move prior to an economic expansion or contraction and foreshadow demand for durable goods. Permits and the CMHPI tend to move together, rising and falling with the demand for housing.

The Conventional Mortgage Home Price Index (CMHPI) is a measure of home prices based on the value of homes with mortgages purchased or securitized by Freddie Mac or Fannie Mae. The CMHPI uses a sophisticated statistical method that compares the price of a house each time it is sold or appraised, generating a measure of the change in home prices over time. As illustrated in the CMHPI, for most of the 1980s, year-over-year growth in New England home prices outpaced growth in national home prices. Towards the end of the decade, however, growth rates in the region’s home prices began to falter and fell sharply through the 1990s, with house prices actually declining in the first half of the decade. Meanwhile, growth in national home prices weakened in the 1990-1991 recession, but remained positive. After 1995, New England home prices began to rebound, and by the late 1990s, were once again outpacing the national rate of growth. In 2005, however, New England home price growth weakened and slumped below the nation. Home prices in New England have been declining since 2007. Recently, house price declines in the nation have exceeded that of the region.

Housing permits in New England followed a similar pattern. After strong year-over-year growth in the first half of the 1980s (data not shown on this graph), permits fell sharply through 1990, in large part due to the real estate and banking troubles that disrupted the New England economy during that time. Since the 1990s, however, both national and New England housing permits have experienced saw-tooth changes. The most significant change in the recent years is the sharp decline in housing permits, starting in 2006, for both the U.S. and New England.