Morning Note: Housing Hurting

As we’ve previously discussed herein, folks (survey respondents) think it’s, frankly, an awful time to go buying a house. That, by the way, was confirmed in the latest from the widely followed University of Michigan Consumer Survey.

Yesterday’s housing index (homebuilder sentiment) says builders have gotten the message, reflected in its present conditions component, which dropped to the lowest read since July 2020. Expectations for future sales, however, held up fine. I suspect they expect the materials cost/supply constraints to ease in the coming months… 

This morning saw more housing data hit the tape, the worst of which being single family housing permits, also hitting their lowest read since July 2020. Multifamily, on the other hand rose 59k (to 587k) last month — rising rents no doubt inspiring new supply. 

Single family starts missed expectations by 70k.

This morning’s weekly mortgage purchase app number also declined (marks the 6th weekly decline out of the past 8). 

I agree with Peter Boockvar’s “bottom line:”

“Bottom line, we know builders are having major issues with delivering homes on time and at an affordable price because of shortages of just about everything including labor. On the demand side, at a lower price there is robust demand, particularly with homes priced below $300k, but at current prices, that demand has certainly lessened.”

Asian equities leaned green overnight, with all but 2 of the 16 markets we track closing higher.

Europe, not so much, so far this morning; 10 of the 19 bourses we follow are in the red as I type.

US major averages are mixed to start the session: Dow down 25 points (0.07%), SP500 flat 0.00%, SP500 Equal Weight down 0.08%, Nasdaq 100 up 0.07%, Nasdaq Comp down 0.01%, Russell 2000 down 0.20%

The VIX (SP500 volatility) sits at 17.94, up 0.17%.

Oil futures are up 0.45%, gold’s up 0.08%, silver’s down 0.50%, copper futures are down 1.17% and the ag complex is up 0.10%.

The 10-year treasury is own (yield up) and the dollar is down 0.06%.

Led by Viacom/CBS, ALB (lithium miner), Mexican equities, solar and wind stocks — but dragged by gold miners, MP (rare earth miner), AMD (chip maker), silver and base metals futures — our core portfolio is up 0.07% to start the day.

Hedge fund manager Colm O’shea’s thinking on on bonds and inflation jibes with last week’s main message we titled The Inconvenient Truth About Today’s Bond Market Signal:

“If you live in a world where everyone assumes that everything goes up forever, then it is inconceivable that prices might go down. Big price changes occur when market participants are forced to reevaluate their prejudices, not necessarily because the world changes that much. The world really didn’t change that much in 2008. It was just that people finally noticed there was a problem. 

Consider the current U.S. debt problem. A lot of people say there is apparently no inflationary threat from the growing U.S. debt because bond yields are low. But that’s not true. Bond yields will only signal that there is a problem when it is too late to fix it. You have to believe in market efficiency to believe that the market will adequately price fiscal risk.”

Have a great day!

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