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New Home Sales rise 16.6% to 619k SAAR

5/24/2016

 
New Home Sale were just released and they were the strongest since January 2008 rising 16.6% to a seasonally adjusted annualized rate of 619k.  The past 3 months were revised up also making this a very strong upside surprise.  A quick disclosure:  Bellaire Capital Management, LLC has been overweight housing stocks in client accounts since 2010 through holdings in ITB & XHB.

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Inventories of New Homes are currently at 247k which represents 4.7 months of inventories at current sales levels.  6 months of inventories is considered normal for New Home Sales.  Lower inventories predict continued increases in home construction.
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Existing Home Sales rise 1.7% to 5.45 million SAAR

5/20/2016

 
April Existing home sales rose 1.7% to a seasonally adjusted annualized rate (SAAR) of 5.45 million.  Existing home sales have been hovering at late 90's levels - with only the housing boom seeing higher levels of existing home sales.
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Existing home sales have less effect on economic growth than new home constructions, but it is nice to see "normal" levels of activity in one part of the housing market.

Kevin Spires, CFA, FRM

Housing Starts rebound, but flat YoY

5/18/2016

 
On Tuesday, the Census Bureau released the New Home Construction report for April.  Housing Starts & Permits rebounded from March with Housing Starts up to a 1.172 million seasonally adjusted annual rate after March's revised 1.099 million seasonally adjusted annual rate.  April's number represents a minor drop from last April of 1.5%. 
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Single Family Housing Starts are up over 5% year over year.  As the Housing Boom was mostly concentrated in Single Family Housing, those starts have been slower to recover than Multi Family Housing Starts.  A 5% annual gain shows the Single Family market is still continuing to recover at a healthy pace - a recovery that still has a long way to go.

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Multi Family Housing Starts have come off a bit over the past few months.  Multi Family Starts have fully recovered from the housing bust coming in at levels greater than anytime in the past 30 years. Multi Family Housing (more than 4 units - basically apartment complexes) missed out on the Housing Boom so there hasn't been a need to work off a large excess inventory of apartments.

Monthly US Housing Chart Package

10/3/2012

 
Kevin Spires, CFA, FRM

Over in the ChartRoom, our Monthly US Housing Chart Package is now updated. 
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One very important data point from the Housing Chart Package is the strong recovery in Home Builders Sentiment.  Released earlier this month, the NAHB/Wells Fargo Housing Market Indicator (HMI) has increased from 16 one year ago to 40 today.  The HMI leads single family housing starts by 3-5 months, so expect a rapid exceleration in Housing Starts over the next few months - after total housing starts have already been running at 20%+ Y/Y growth rates already.

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One reason that Homebuilders have been feeling better is that Home Prices have stopped declining.  It is tough to build a spec house and have the price drop 5% over the time you are building the house - putting tremendous pressure on profit margins.

Now that 6 years have passed since the bubble burst, expect home construction to grow at double digit rates for the foreseeable future - turning that massive headwind into an economic tailwind.

Monthly US Housing Recap...

8/29/2012

 
Kevin Spires, CFA, FRM

The US Housing Market has put on an impressive run in the past 12 months.  Housing Starts are up 21.5% Y/Y, with completions up 5.4%, and homes under construction up 17.0%.  New Home sales have risen 26%+ over the past 12 months driving inventories down by 14.5%.
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Despite all that wonderful data, the US Housing recovery is still in its infancy.  Housing Starts are still 50% below normal levels - implying an additional 100% growth in starts over the new few years.

Continued strong growth in the near term is expect as the NAHB/Wells Fargo Housing Market Indicator (HMI) has accelerated higher over the past 3 months.  Housing Starts, which lag the HMI by 2-4 months, should further accelerate in the next 1-2 months as well.

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With the increased activity levels, Home Prices look to have bottomed as well.  Further sentiment increases as measured by the HMI could lead to some modest increases in Home Prices after a brutal 6 year decline.

All this impressive data has led to strong performance by Housing Sector stocks.  XHB, a Housing Sector ETF is up 30%+ relative to the S&P 500 and up an impressive 65% over the past twelve months.

Click on our Monthly Housing Sector Chart Package for more data...

US Housing Market Recap

7/31/2012

 
Kevin Spires, CFA, FRM
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The Housing Recovery is for real.  Housing Starts have been up over 20% Y/Y for all of 2012.  Housing Inventories are down, rental and home vacancies are down, but household formation is up 1.7% Y/Y.  As a result, home construction is finally starting to recover.

I would expect the Housing Sector to continue to be a bright spot in the US Economy over the next 6-12 months.  Builders Sentiment is at a 5 year high and Home Prices are starting to stabilize.

Current levels of growth in Housing are normally associated with above trend growth in the US Economy. But the current level of Housing Starts is so low that while the contribution will be positive, it won't be anywhere near as powerful as usual due to the still large inventories of extra homes built during the Housing Boom.

Click on the Monthly Housing Chart Package for more information.

NAHB/Wells Fargo Housing Marketing Indicator

7/17/2012

 
Kevin Spires, CFA, FRM
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The latest update to the NAHB/Wells Fargo Housing Market Indicator (HMI) was reported as 35 this morning.  This is above the consensus level of 30.  In this survey, 50 is considered to be normal conditions for the single family housing market.

While the level of 35 is still very weak, The HMI has been accelerating at a very rapid pace over the past 9 months.  Housing Starts, which have been up over 25% in the first five months of 2012 versus the first five months of 2011, should continue to grow strongly over the rest of 2012 as the HMI tends to lead Housing Starts by 3-5 months.  Despite all the worries about Europe and China's economic growth, the worst housing market since the beginning of record keeping is clearly recovering and will tend to support (although not guarantee) above trend growth for the next 3-5 years.

The idea that the U.S. is entering a recession, based on this one indicator, is laughable.  The Housing Sector is now growing at 20+% real rates in 2012 and the 2MM+ construction jobs lost from 2006 through 2011 should slowly be regained.

As I write this post, Ben Bernanke is giving his semi-annual report on Monetary Policy to congress.  Based on the trends in housing, I would not expect Bernanke to embark on QE3.  Of course, I think Bernanke wants to increase the pace and level of the recovery, so QE3 should not be ruled out based on any one indicator.

Construction Employment still down 2.2 Million from peak

7/5/2012

 
Kevin Spires, CFA, FRM

Employment in the construction industry is still down 2.2 Million from its peak back in 2006.
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Residential Building Construction is down almost 45% from its peak, Non-Residential Buildings Construction is down over 20% from its peak and total construction jobs are still down almost 29% from their peak. 

There doesn't appear to be any real bounce yet despite the 25% pick up in Housing Starts in 2012 versus 2011 - so Construction Employment is still a huge drag on the recovery.

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To a large degree, this drop in construction employment is not simply a cyclical drop that can be reversed with easer monetary policy.  I believe, due to the massive overbuild during the Housing Bubble, that the job losses are longer in duration and more akin to a structural shift in economic patterns that are not usually reversible with easy monetary policy.  1.7% of the current 8.2% Unemployment Rate can be attributed to the structural loss of construction jobs - leaving the Unemployment Rate without these Structural Construction job losses at 6.5%.

To a large degree, I think the economy is returning to full cyclical employment faster than the Federal Reserve (and most market observers) believes.  A faster return to full cyclical employment would have profound effects on the future path of inflation and interest rates that is not currently factored into market expectations.  Additionally, as the structural head winds in the Housing Sector fade in 2013/2014, unexpectedly large gains in employment and output could result.

Housing Starts & Permits continue to rise

6/20/2012

 
Kevin Spires, CFA, FRM
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Housing Starts & Permits were released yesterday.  Housing Starts were 708k on a seasonally adjusted annual rate (SAAR).  May Housing Permits were 780k on a SAAR basis.  May Starts were down 4.8% vs. the revised level of 744k in April while permits were up 7.8% to their highest level since September of 2008.

Overall, not too shabby a report.  Housing Starts are now running 26.0% above the first 5 months from last year while Permits are running 26.6% higher versus the first five months last year.  Housing is in a clear recovery.  The only question is how long it takes for the recovery to bring activity and employment up to pre-recession levels.  I expect that it will still take many years and we will still won't fully recover until after the next recession.

Housing Market Index steady at 29

6/18/2012

 
Kevin Spires, CFA, FRM
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The NAHB Wells Fargo Housing Market Indicator was released earlier today.  The level held steady at 29 - although last month was revised down to 28 from an originally reported 29.

With a decent lead on Single Family Housing Starts, the current level of the HMI implies continued improvement in single family housing starts.  50 is considered "normal" conditions on the HMI, so we are a long way from a complete recovery in the Housing Market, but the recovery process is underway.

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