Housing Starts are Finished

Posted by David Rosenberg - Gluskin Sheff

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The U.S. housing market is definitely weakening.  That 5.9% MoM slide in housing starts, to 575k at an annual rate in February, was far more than just a weather report because even excluding the Northeast, activity still fell 5.4% on the month.

The single-family sector dipped 0.6% MoM, to 499k at an annual rate.  Single- family starts appear to have bottomed out last spring/summer, but the problem is that there is no follow-through despite all the stimulus — in large part because of the still large overhang of supply.

The multi-family sector was the key culprit, falling 30.3% MoM in February back down to 76k at an annual rate.  Moreover, there is no reason for the weather to have played a role in the fact that building permits were down 1.6% in February — the second decline in the past three months.  And, the NAHB index is highly suggestive of further declines in both home sales and housing starts in coming months.  Single-family starts and the NAHB are both back down to June-July levels and yet the S&P Homebuilding index is up 40% from that time.  That is what you call …. a whole lot of air.

….also in today’s comment HERE

  • While you were sleeping — the Fed’s commitment to keep rates low for the foreseeable future and Japan’s move to expand its liquidity provisioning are helping bolster investor risk appetite; the U.S. dollar and the Yen are softer, while gold is gaining ground, up three days in a row.
  • What’s next? So far, the market has been able to digest California, Dubai, and Greece, but what about China?
  • Subtle changes to the Fed statement. The Fed did not shift its stance on the funds rate, but there were subtle changes in the language about employment, capex, and real estate, both commercial and residential
  • Is income still king if the U.S. gets downgraded? The answer is yes
  • Canada also likes the income theme — bond mutual funds saw an inflow of $1.3bln, while equity funds only saw a net intake of $105mln
  • U.S. housing starts are finished
  • Good news on the inflation front in the U.S.; import prices fell in February
  • The Canadian dollar is shooting for par


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