We begin a new trading day with a new report on homebuilding from July,
Housing Starts and Building Permits, which further illustrate what we saw from yesterday’s survey of National Association of Home Builders (NAHB), namely that we are currently in a “housing recession.” Headline new starts reached 1.446 million seasonally adjusted, annualized units last month, down from the 1.52 million expected and -9.6% from an upwardly revised June number. This represents another leg down from recent prints, which themselves were down form the 1.8 million new starts we were seeing as recently as April of this year. It’s the lowest monthly read in more than a year; should these numbers continue congealing around these levels, it would spell the definite end of the housing boom of the “Great Reopening.” But the NAHB already knows this. Building Permits actually bettered expectations in July: 1.674 million seasonally adjusted, annualized units were reported last month, down from a flat 1.70 million in June by -1.3%. Again, we hearken back to 2021 prints to find levels this low. If we see a silver lining in this data, it’s that homebuilders are biting the bullet and working down inventory, as housing has enjoyed a +30% increase over the last two years. Whatever strength we see in this starts data is decidedly on the multi-family side, although what’s currently needed more than anything in this economy is affordable multi-family housing. Right now, the supply glut is roughly double what a normal cycle would present: 9.3 months’ supply versus 4-5 months average. We’re also seeing a record number of mortgage cancellations in the current market: 63K in July alone. As Housing represents roughly a third of the Consumer Price Index (CPI), what we’re seeing before our eyes is a melting down of the iceberg of high inflation. While this is not necessarily good news for homebuilders or home owners looking to put their place on the market, it is good news for the Fed, who will have another Starts/Permits report out prior to their interest rate policy decision late next month. Pre-markets aren’t loving what they’re seeing, however: upon the release of this data, early trading has more than tripled its sell-off, on the Dow from -20 points to -70 points in just the past few minutes. But this ultimately might be a “bad news is good news” read overall, even if the housing market will necessarily grind out the next several months after an extended period of strength. One company that has made the most of homeowners taking on home improvement tasks is Home Depot ( HD Quick Quote HD - Free Report) , which beat estimates on both top and bottom lines in its Q2 earnings report this morning: $5.05 per share beat the Zacks consensus by a solid dime, and is up admirably from the $4.53 per share posted in the year-ago quarter. However, while these were record quarterly numbers, an unexpected drop in customer transactions overall has sent Home Depot’s stock down -1.3% in early trading. Walmart ( WMT Quick Quote WMT - Free Report) also beat expectations in its Q2 report this morning — albeit after two rounds of lowered quarterly guidance — to earnings of $1.77 per share on $152.9 billion in revenues, which surpassed estimates by +10.6% and +1%, respectively. Earnings are still down a penny from the year-ago quarter, although sales are up from $141 billion a year ago. Shares are up +4% in early trading on the news.