Morning Report: Blowout housing starts number

Vital Statistics:

 

Last Change
S&P futures 3315 -7.25
Oil (WTI) 57.83 -0.74
10 year government bond yield 1.79%
30 year fixed rate mortgage 3.88%

 

Stocks are lower this morning as US investors return from a 3 day weekend. Bonds and MBS are flat.

 

Housing starts hit a 13 year high, rising to a seasonally-adjusted annual rate of 1.6 million. This is up 17% from November and 41% above a year ago. The caveat: the uncertainty around this number is pretty high, so it might get revised downward next month. That said, we have heard from the builders that they are seeing high traffic and no seasonal slowdown. Housing has been the missing link from the post-crisis recovery, and there clearly is unsatisfied demand. If this is the year we finally see homebuilding begin to meet demand, then current GDP estimates for 2020 are way too low. Note Larry Kudlow just laid a marker: GDP growth will hit 3% this year. Compare this to the current estimates of 1.2% – 2%.

 

housing starts

 

It should be a relatively quiet week, although Davos is going on, which means lots of CNBC interviews in the snow. The theme seems to be environmental this year. We don’t have much in economic data (nothing market-moving at least) and no Fed-Speak. We will get some housing data, with the FHFA House Price index and NAR’s existing home sales report tomorrow.

 

Job openings fell to 6.8 million in November, according to the JOLTS survey. While this is below the 7 million openings we have become accustomed to, it is still quite elevated and speaks to a robust labor market. The quits rate remained at 2.3%. Job openings fell in manufacturing, which is probably related to Boeing’s 737 woes.

 

US home sales prices rose 6.9% in December, according to Redfin. Falling interest rates have boosted home affordability, which is translating into higher prices

 

Redfin price chart

Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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