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@ Galetaire
2025-06-15 09:10:25The velocity of money inform us about how quick the money moves, and is a frequent indicator to research the current economic environment.
An interesting twist is using housing instead of money. Why? The main reasons that come to mind are:
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It’s easier to measure housing velocity than dollar velocity.
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Data on housing transactions is more reliable.
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Residential real state is the largest store of wealth in the world.
> The residential real estate is worth $287 trillion. Not even all the money deposited in stocks ($98 trillion) and bonds ($129 trillion), added together, surpass the residential real state market. In a way, housing is the economy.
The next chart shows the velocity of housing in Spain, where we observe a negative correlation of -0.53, which is quite significant. This suggests that the higher the housing velocity, the higher the inflation; and the lower the housing velocity, the lower the inflation.
> The velocity is a measurement of the rate at which the current stock of houses is exchanged. The lower the value, the higher the velocity. A ratio of (x) means that it would take (x) years to exchange the stock at current speed.
Therefore, by knowing how quickly the housing sector is moving, we can infer whether we are living under an inflationary or deflationary period.
Currently, housing velocity has been increasing, reaching a value of 36 in 2025, a relatively high figure (all time high was 28 in 2006), and at the same time, we are experiencing an inflationary period. Hopefully this data can help us navigate the economic world and invest accordingly.
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