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What's Holding Housing Back?

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Tuesday, June 17, 2014

Stocks today appear on track to open modestly positive even though this morning’s inflation and housing data was somewhat on the disappointing side. The Fed remains in the spotlight, with the two day FOMC meeting getting underway today.

Today’s housing data came on weak side, with both Starts and Permits coming modestly shy of expectations, likely indicating that something other than weather was weighing on the sector in recent months. Starts remained a shade above the one million mark, on an annualized seasonally adjusted basis. They had moved back above the one million mark in April, after having crossed that threshold for the first time since the housing crisis last November.

But April’s gains were primarily in the multi-family or apartment buildings category, with the single-family homes category essentially flat. The May Starts tally this morning was below April’s level, with both categories losing ground. The Permits ‘miss’ was more pronounced, falling below the one million mark on a sharp drop in multi-family permits. The silver lining in today’s report was the uptick in single-family permits, up +3.7% from April’s pace, the best increase since late 2012.

The housing recovery lost some of its luster around mid-2013 and has struggled to get back on track even though interest rates remain low by historical standards. The market expected a strong bounce back in activities this Spring, but the magnitude of the rebound has thus far been underwhelming. Bottom line, housing is improving, but the pace of improvement isn’t strong enough.

Sheraz Mian

Director of Research

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