Morning Report: Housing starts still weak

Vital Statistics:

Stocks are higher this morning as the market continues its rebound. Bonds and MBS are flat.

Housing starts rose 5.7% MOM to 1.23 million in April, which is down about 2.5% from a year ago. March was revised upward to 1.17 million. Building Permits rose to 1.3 million, up a touch from March, but down 6% YOY. We saw an increase in activity in the historically lagging areas – the Midwest and the Northeast. You would have thought that increasing home prices would drive more construction, but so far there is no evidence of that. Costs are increasing, especially labor costs. Tariffs are also being blamed, but lumber prices are down over 50% from a year ago.

Despite the slow and steady pace of new homebuilding, builder confidence did improve markedly in April, according to the NAHB Housing Market Index. “Builders are busy catching up after a wet winter, and many characterize sales as solid, driven by improved demand and ongoing low overall supply,” said NAHB Chairman Greg Ugalde. “However, affordability challenges persist and remain a big impediment to stronger sales.” “Mortgage rates are hovering just above 4% following a challenging fourth quarter of 2018 when they peaked near 5%. This lower interest rate environment, along with ongoing job growth and rising wages, is contributing to a gradual improvement in the marketplace,” said NAHB Chief Economist Robert Dietz.  “At the same time, builders continue to deal with ongoing labor and lot shortages and rising material costs that are holding back supply and harming affordability.”

Initial Jobless Claims rose to 220,000 last week. The labor market continues to be strong.

Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical View all posts by Brent Nyitray