The housing market is hugely important as an economic indicator. Consumer spending makes up some two-thirds of GDP and, therefore, the prospects for the market for the largest physical purchase most consumers will ever make is very telling about the state of the economy.
We could dig deep into the capital, materials and workers needed to bring a dwelling from the groundbreaking stage to its finale---not to mention all the ancillary activity generated by the furnishing, etc.---and what that means for the economy, but, again, you get it.
So let's briefly explore the immediate state of the housing market. Here I'll cut and paste just the housing-related commentary from the notes to self I've compiled over the past few weeks (YoY = year-over-year. MoM = month-over-month. WoW = week-over-week):
June 25
Existing home sales up 4.89 mill, which was a beat. MoM + 4.9%... a beat
New home sales 504k, a beat. MoM +18.6%, a huge beat...
Mortgage apps WoW -1%, a miss...
The employment numbers are improving, as is overall jobs sentiment as well. That's big.
Housing seems to be all over the place. Previous WoW mortgage apps were up. New home sales, as of last reading, are on the rise. Homebuilder stocks have been doing well of late. However, again, we keep seeing fits and starts with the stats.
Interest rates rising a bunch would be a big headwind for housing, and the overall economy...
June 30
Housing: the May Pending Home Sales Report from Dept. of Realtors (index) spiked up 6.1%. That was huge considering the 1.5% consensus estimate. Yet it was 5% below last May's index, however that was the month the first-time homebuyers tax credit (or when taxpayers paid to get some folks into their first homes) expired and folks rushed to buy. There's no question that the housing numbers, on balance, have improved of late, which is a very bullish indicator for the economy going forward.
July 9
Mortgage apps up 1.9% WoW, versus a -.2% move the prior week. That's very good news for housing, particularly since mortgage rates rose (from 4.28 to 4.32). Refinances are down, new purchases up. Speaks well about present economy.
Comment from CNBC's D. Olick:
"The housing market continues to sputter into recovery, largely on the back of higher net-worth and cash buyers. The latter made up more than one-third of all May home sales. First-time buyers are still largely left out, hampered by tighter mortgage underwriting and high levels of student debt."
The ISMs, Markits, NFIB, housing, materials, boats, autos, employment.... The economy is unquestionable improving. Haven't seen big wage gains however, which is what appears to be keeping the Fed at bay for now.
July 16
Weekly mortgage apps dropped 3.6% vs +1.9% for prior period. Housing stats continue to come in mixed... 8% drop in mortgage apps for purchases... fairly flat for refinances.
Homebuilder Confidence Index at 53... That's a bullish indicator going forward. Future sales expectations up markedly...
July 17
Building permits were surprisingly down 4.2% in June, vs estimate of up 4.2%. Kinda flies in the face of yesterday's positive reading on homebuilder confidence. However, they are up 2.7% YoY...
Breaking it down: single family permits were actually up 2.6% over May... Which means multi-fam tanked.
Housing starts were down 9.3% compared to May, but up 7.5% YoY.
Housing completions were down 12% vs May, but up 3.4% YoY
So, while, on balance, improving, robust would in no way describe the housing market at present. I can't help but wonder if the severity of the 2008 collapse in home values didn't do a number on the psyche of the would-be buyer---making him/her, and the data, unusually skittish. Low inventory, tight lenders and rising prices are playing no small role in the mixed-ness of the data as well, I'm sure.
All that said, the latest homebuilder and consumer confidence surveys spelling increased optimism could (not a prediction) portend good things for housing, as well as the overall economy, in the months to come.
Stay tuned...
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