Market Update
Weekly Commentary
Thumbnail Sketch: In spite of the new construction figures, the housing market—and, in spite of manufacturing data and jobless claims, the overall economy—are faring reasonably well. Those, though, are rather large caveats and they need discussion.
First, why did the number of buildings under construction fall through the floor? Why now? Aren’t we reaching the bottom for the real estate correction? And aren’t builders, in the Housing Market Index survey, displaying a recovering confidence in the housing market?
The problem is that construction was moving along at a very heady pace when the real estate market slowed, leaving many builders with both a large overhang of new inventory and commitments to build more properties than they needed to. It is only now that we are seeing the number of newly-constructed homes on the market truly slow and the number of starts decline. This is, we believe, a relatively temporary situation…but the analysts at Moody’s Economy.com predict that the new-home market will be slower to truly recover than the existing-home market. Though builders have more control over how their inventory is sold and can institute wide-spread incentive programs, sellers of existing homes have more flexibility generally as regards when and whether they bring their homes to market.
That said, what we see here are very sobering data suggesting that the real estate recovery will prove slow and gradual—in some areas, something of a grind. Nonetheless, this does not mean that a bottom for the correction is no longer near. In many areas, it has apparently already been reached. In others, it’s on the way.
But what about the spike in jobless claims? Will weaker employment translate into weaker consumer confidence and fewer people entering the housing market?
The issue here, primarily, is weather, with the winter cold forcing more people to seek unemployment insurance. As a result, the jobless claims data isn’t so much displaying an eroding jobs market as it’s bringing more of the unemployed into the data. In other words, the jobless claims are becoming a bit more real.
Unsettling though it may be, none of this will have a great deal of effect on the market, and further, interest rates remain attractive and mortgage application levels strong.
KEY INDICATORS
Gold $661.40/ounce [down]
Crude Oil $57.43/barrel [down]
U.S. Dollar to…
Euro .7609 [down slightly]
Japanese Yen 120.06 [down]
6-mo Treasury Bill Yield 5.14%
10-yr Treasury Note Yield 4.69%
[both slightly down]
30-yr Fixed-rate Mortgage 6.29%
15-yr Fixed-rate Mortgage 6.01%
1-yr ARM 5.89% [HSH average rates: fixeds down; ARM up 2 bps]
Mortgage Bankers Association Mortgage Applications Index
week ending 2/9
Overall
639.8 (up 1.5%; down 0.2%
the week prior)
Purchase Money Loans
400.7 (down 1%; down 0.8%
the week prior)
Refinancing Loans
2031.7 (up 4.5%; up 0.2%
the week prior)
Weekly Jobless Claims 2/10
357,000 first computation – 313,000 prior week (with 2,000 upward revision)
Industrial Production Jan
Down 0.5% - capacity factory utilization down to 81.2%
NAHB Housing Market Index Feb
Up 5 points to 40
Producer Price Index (PPI) Jan
Down 0.6% - core level (with food & energy prices removed) up 0.2%
New Residential Construction Jan
Starts down 14.3% from prior month (down 37.8% from prior year) – Permits down 2.8% from prior month
You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.
