Bad News Could Be Good News for the Housing Market




Lots of “disappointing” data on housing this morning, but there’s more to the story than those headline figures.

Housing starts–which gauge new home construction–dropped nearly 9% last month. Excluding multifamily builds, single-family starts–a bellwether for the whole housing market–plunged to their lowest level in nearly two years, a 805,000 seasonally adjusted annual rate.

Sounds terrible, but as J.P. Morgan points out, that plunge followed a surge in January that saw single-family starts hit their highest level yet of the entire expansion: 970,000 (also a seasonally adjusted annual rate).

As for single-family building permits, which are a leading gauge of starts, they have certainly been soft lately, unchanged last month after falling the two months prior, JPM economist Daniel Silver noted.

This is not new: recall that residential investment actually declined outright last year even as GDP grew roughly 3%. As my former colleague (and skateboard enthusiast) Conor Dougherty recently observed in the N.Y. Times, “Housing Is Already in a Slump. So It (Probably) Can’t Cause a Recession.”

As for home prices, the 20-city Case-Shiller index for January grew only 3.6%, the least since late 2012. But as Peter Boockvar of Bleakley Advisory wryly pointed out, “Fortunately for those looking to buy a home, particularly that first time Millennial, the pace of home price gains continues to slow.”

The softness in home prices, in other words, is arguably a good thing from a macro point of view. Couple that with the plunge in interest rates this week that should lower mortgage rates quite a bit, and it could be a decent spring home-buying season after all.

More at 1 p.m.! See you then…

Kelly Evans









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