(Note): I apologize to myself and or to the errant reader of these economic data missives; for the delay in “publishing” today. I honestly can’t keep up with the number of releases and what I feel like is the proper analysis of the said report. Perhaps, it is the formally known as a condition called Aspergers that plagues my rapitdity.
What does the DM-IV call it now? Autism! That’s right a more blanketed statement cures all. For once, all those diagnosed with the latter condition were tainted with the scarlet letter of shame due to the correlation between the areas with most Aspergers diagnoses had the most funding of the research into the “disease”?
Nevertheless, I soldier on because at the end of the day I find each and every report, regardless of the market impact fascinating to the nth degree.
Recent History Of This Indicator
Housing starts and permits had been flat most of the year but they did accelerate sharply in October, up 13.7 percent for starts to a 1.290 million annualized rate and up 7.4 percent for permits to 1.316 million (1.297 million initially reported). October’s highlights included starts for single-family homes, up 5.3 percent to an 877,000 rate, and permits for multi-family homes which rose 15.9 percent to 466,000. Forecasters see give back in November with the consensus for starts at 1.240 million and permits at 1.270 million.
Here’s Goldman with the Bottom Line.
Housing Starts and Building Permits
(ALSO KNOWN AS NEW RESIDENTIAL CONSTRUCTION)
Market Sensitivity: Medium.
What Is It: Records the number of new homes being built and permits for future construction.
Most Current News Release on the Internet: www.census.gov/construction/nrc/
Home Web Address: www.census.gov
Release Time: 8:30 a.m. (ET); normally released two or three weeks following the month being covered.
Source: Census Bureau, Department of Commerce.
Revisions: Modest revisions occur for the preceding two months on housing starts and for just one month on permits. Seasonal adjustment changes are made every April, and they cover two years’ worth of data.”
Bernard Baumohl. “The Secrets of Economic Indicators:”
In fact, you can actually track the entire construction cycle for homes by looking at Tables 1 through 5 in this release:
• Table 1 records the number of permits issued for home construction by type of home and region of the country. It’s a good indicator of how confident builders are about future demand.
• Table 2 counts the number of units where construction permits have been granted but where groundbreaking has not yet started (not shown). A significant rise in these numbers suggests that builders are having trouble keeping up with the demand for new homes.
• Table 3 lists the number of units where construction began in the previous month.
• Table 4 tracks the number of new housing units undergoing construction as of the end of the previous month (not shown).
• Table 5 notes the number of homes where construction was completed in the previous month (not shown).
Overall, it takes about six months on average for a single-family house to be built, from groundbreaking to completion. The cycle for a multifamily dwelling is ten months to a year.
Good news in housing is often perceived as bad news for players in the fixed-income markets. A healthy pickup in housing starts depicts an economy that is robust and where inflation pressures are likely to accelerate. That can knock down bond prices and cause yields to rise, leading to losses on bond portfolios. Traders prefer weak or falling housing starts because they portend a slackening economy with less inflation—factors that lift bond prices.
Prolonged weakness in housing starts can alarm stock investors since it’s often a precursor to a broader downturn in the economy. On the other hand, if housing activity is vibrant and inflation remains contained, shareholders will view it as a positive sign. A rebound in housing can have a beneficial impact on other businesses as well. This is bullish for corporate profits and thus for stock prices. The danger comes when housing starts surge at a time when the rest of the economy is already operating at full speed. Investors might withdraw from stocks as worries mount that the Federal Reserve will raise short-term interest rates to curb economic activity.
Foreign investors are attracted to the U.S. if they can earn a higher rate of return here relative to what they can receive in other countries. Thus, a strong housing report is considered bullish for the dollar because it usually supports a scenario of higher corporate profits and a firming of U.S. interest rates.
The dollar’s value can slip with weak housing data because it signals slower economic growth in the future and thus falling interest rates. Under such circumstances, foreigners might choose to seek out more lucrative investment opportunities outside the U.S.