Morning Report: Housing starts disappoint

Vital Statistics:

	Last	Change
S&P futures	4,687	-8.2
Oil (WTI)	79.82	-0.93
10 year government bond yield		1.63%
30 year fixed rate mortgage		3.27%

Stocks are lower as investors fret about inflation. Bonds and MBS are down.

Housing starts disappointed again, coming in at 1.52 million. Building Permits were a bit better, rising to 1.65 million. Given the shortage of housing in the US, these numbers should be north of 2 million. This has been going on for years, so it cannot be blamed on the supply chain shortages of the past two years.

Housing starts are stuck around the average level since 1959. When you consider that the US population has risen 85% since then you can see the issue. Below is a chart of housing starts divided by population.

According to the National Association of Realtors, we have a shortage of about 5 million units. That is 3 years of housing starts alone.

Separately, homebuilders sentiment rose 3 points, according to the NAHB / Wells Fargo housing index. “The solid market for home building continued in November despite ongoing supply-side challenges,” said NAHB Chairman Chuck Fowke. “Lack of resale inventory combined with strong consumer demand continues to boost single-family home building. In addition to well publicized concerns over building materials and the national supply chain, labor and building lot access are key constraints for housing supply,” said NAHB Chief Economist Robert Dietz. “Lot availability is at multi-decade lows and the construction industry currently has more than 330,000 open positions.”

Mortgage Applications fell by 3% last week as purchases increased by 2% and refis fell by 5%. “Refinance applications decreased for the seventh time in eight weeks, as mortgage rates moved higher after two weeks of declines.” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Activity has been particularly sensitive to rate movements, and last week’s decline was driven by a drop in conventional and FHA refinance applications, which offset an increase in VA refinance applications. All mortgage rates in MBA’s survey increased, with the 30-year fixed rate climbing to 3.2 percent.”