Morning Report: Housing starts and building permits going the wrong way 4/19/16

Markets are higher this morning as commodities rally. Bonds and MBS are flattish.

Housing starts fell 9% MOM in March to an annualized rate of 1.09 million, a highly disappointing number. Both SFR and multi-fam fell. This is the lowest level since October. Building Permits also fell around 8%, hitting a 1 year low. It is astounding that we have such a deficit of housing in this country, and are building 25% fewer homes than we did before the bubble, Housing (or lack thereof) has been the reason why this recovery has been so weak. Take a look at the chart below, which shows housing starts from 1959. Typically you see V-shaped recoveries in housing starts, however this time you haven’t. Granted some of that was due to oversupply from the bubble years, but that excess inventory got worked off years ago. Is the problem a lack of skilled labor? Credit? Regulation? Probably all three.

 

While housing starts remain depressed, builder confidence is still strong, with the NAHB Housing Market Index (a measure of homebuilder sentiment) holding steady at 58 in April. The builders continue to report big increases in average selling prices, although gross margins are lagging. This means input prices (raw land, sticks and bricks, and labor) are rising faster than prices. Given that incomes aren’t rising in the mid-high single digits the way ASPs have been, we have to be hitting the ceiling. Note we will get earnings from Pulte and D.R. Horton on Thursday.

There are signs of weakness building in the labor market – temporary employees are typically the canary in the coal mine, and temp hiring is falling. Historically, that has been an early warning sign of a recession. Separately, the Federal Reserve’s Labor Market Conditions Index, which is a meta-index of leading and lagging indicators has been turning downward. Could 2015 have been the peak of the labor market recovery?

 

Certainly things are not going swimmingly in the financial sector: Goldman reported a 60% drop in earnings as revenues fell. The bright side? The multi-billion fines from the government may finally be in the rear view mirror. I wonder if you tally up all the bailout money and compare it to the revenues the government has received in paybacks, fines, and Fannie Mae profits how profitable was the Great Recession for the government.

32 Responses

  1. Brent, on your final quip, the dip in taxation revenues from ’09-’13 would have to be taken into account.

    Frist.

    Liked by 1 person

    • It seems to me that there are three separate clear issues in the DAPA case.

      1] Does Texas have standing? Texas asserts standing by reason of cost, but I do not know the state of the evidence in the record regarding cost.

      2] Does the Executive branch have the power to designate a subclass of registered illegal immigrants? This is a constitutional issue.

      3] If it does, did it do so in the correct manner? This is a statutory issue.
      The trial opinion that the 5th C. and presumably, I think, the Supremes, will uphold is that the Executive imposed a regulatory scheme without going through APA, which is a statutory violation. APA is the Due Procedural method of regulating.

      This is the ground on which the Supremes should decide. Whenever a statute that is constitutional requires a decision it is bad form to rely on the constitution to make the same decision.

      If the 4 liberal justices want to reverse the 5th Circuit they will have to do it on the standing issue. I think the APA based result against the POTUS is a no brainer, and only no standing would get around that.

      I will add that standing here is a complicated issue in and of itself. There apparently is no actual evidence supporting Texas’ claim that damage would follow, so the Court could honestly remand for evidence on the damage issue. But assuming standing, a set of rules of broad application like this one would have to be published in the Federal Register and be open to comment, which it never was.

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      • Is there a Constitutional obligation on the Executive branch to enforce Federal laws? Or to make a reasonable attempt to enforce them?

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        • Of course, George. The entire argument of the USA in this case is that Congress told them to enforce the Immigration laws but didn’t put up enough money to weed out and deport illegals. Texas conceded that factual point in the case. Thus the parties agree that the Executive must prioritize and the Executive says it can do so better with a regulatory scheme that brings illegal aliens out into the open. So far, so good.

          Well, how is the Executive supposed to do a regulatory scheme? By Presidential fiat? No. It is supposed to publish its proposal in the CFR and allow months for comment and review by citizens and interested parties and by Congress, as well. Complex regs are often proposed and rewritten over a period of years before being published, because of really on top of it people like NoVA.

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        • Mark:

          Thus the parties agree that the Executive must prioritize and the Executive says it can do so better with a regulatory scheme that brings illegal aliens out into the open.

          How can it possibly be said to be a “better” enforcement of a law prohibiting illegal immigrants from remaining in the country to bring such aliens out into the open by not only promising to let them remain in the country, but granting them additional benefits and privileges?

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        • I take it you would not offer a 2 yr carrot to get them out in the open and identified, with crim background checks, and the having to pay taxes on their income.

          Judgment call.

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        • Mark:

          I take it you would not offer a 2 yr carrot to get them out in the open and identified..

          I am fairly positive that the enforcement problem does not stem from an inability to find them.

          and the having to pay taxes on their income.

          What do you suppose the odds are that the government, particularly a Democratic government, is going to willingly start to deport a source of revenue after it starts paying? I place those odds at roughly Blutarski’s grade point average.

          Obama’s plan is is most definitely not a strategy for enforcing the law. It is a strategy for avoiding doing so.

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        • You may be correct about the rest, but as for

          I am fairly positive that the enforcement problem does not stem from an inability to find them.

          you would be wrong.

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        • Mark:

          you would be wrong.

          I am a but a humble citizen living in Connecticut and even I could direct the government to where they could find illegal aliens. If I lived in Texas, closer to the actual border crossing, I suspect it would be even easier to do so.

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        • The underlying question is more interesting, George, but I am not competent to address it. If DAPA contradicts INA, of course it should be ruled unlawful in a case on those merits.

          I do know that the APA violation should be 8-0, if Texas has standing. I think Texas ought to have standing, and if it did not evidence the damage before I am sure it can do so easily in a rehearing.

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      • Mark:

        It seems to me that there are three separate clear issues in the DAPA case.

        Don’t forget that we have 2 SCOTUS justices who were appointed by a President for their ability and willingness to “empathize”, a key, perhaps the key, feature in judging the meaning of the law according to our President. So for at least 2 members of the court, and probably 4, I suspect that who is more deserving of empathy, poor immigrants or the big, bad, government of Texas, will be an issue as well. Perhaps even the deciding issue.

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      • One reason that I ask is that both Democrats running for the nomination have said they will cease deporting illegal immigrants. Could a Oresident say, for example, that they would cease enforcing the tax code? Or Federal Firearms laws?

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        • The D candidates are full of crap on immigration; different crap then the likely R nominee, but crap, anyway. Actually I did not know they had gone that far in pandering, but it does not surprise me.

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  2. Brent:

    I wonder if you tally up all the bailout money and compare it to the revenues the government has received in paybacks, fines, and Fannie Mae profits how profitable was the Great Recession for the government.

    According to ProPublica, the government has made $69 billion, not including the fines.

    https://projects.propublica.org/bailout/

    We really should stop calling TARP a “baliout”. TARP was more akin to an actual investment than virtually any other government spending, which politicians routinely (mis) characterize as “investing”.

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  3. Like

    • Bill Nye, the Mechanical Engineering guy.

      You’re suppose to be a climate scientist to understand climate change. Except when you’ve got a BS in Mechanical Engineering and you’re a public figure. Or Leonardo DiCaprio. Or Sean Penn. Or . . .

      Like

  4. Nothing quite as entertaining as unintentional millennial self parody at Vox:

    http://www.vox.com/2016/4/19/11451092/alex-st-john-tech-recruiting-millennials-women

    Source of their discontent:

    http://www.alexstjohn.com/WP/2016/04/18/recruiting-giants-2/

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  5. Mark, how is Austin reacting to the Love Wins, Fag cake hoax?

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    • Consensus is it’s a hoax, as you wrote. WF has videotape.

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    • I suspect 99.99999% of these incidents are faked by an activist group to draw attention to their cause….

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      • In Whole Foods’ response, they said this:

        Our team members do not accept or design bakery orders that include language or images that are offensive.

        Interesting that the bakery at WF is allowed to refuse orders that it finds offensive. Other bakers have found themselves in legal trouble for doing just that.

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        • Not sure if they are allowed (or would be, given the direction of the law) to refuse an order to someone whose lifestyle they find offensive. I’m pretty sure your average Christian baker can refuse to fulfill an order of a cake decorated with tiny penises that says “Buttsex” if they want to, they just cannot (apparently) refuse to provide the same sort of cake they would bake for a straight wedding to a gay wedding. Presumably there’s some sort of gray area when it comes to groom & groom cake toppers, though.

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        • KW:

          Not sure if they are allowed (or would be, given the direction of the law) to refuse an order to someone whose lifestyle they find offensive.

          I am guessing that in Texas they would be.

          But anyway, the point is simply that there is no principle behind allowing bakeries to decide to refuse to bake a cake in one instance but not allowing them to do so in another. What is inoffensive to one person can be offensive to another. And all such refusals are acts of discrimination against something. The law as desired by progressives is arbitrary, protecting favored groups/activities and not protecting dis-favored groups/activities.

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        • Heh, groom and groom cake topper.

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      • Well, 99.99999% of them are faked when they “result” in a lawsuit, or there is some other big money grab attached to the “incident”. Follow the money.

        And it’s just irrational. Hey, this guy is effeminate. I’m going to lose my job by adding an epithet to the cake for no reason! Not to mention, why was he playing that game at Whole Foods? The person who did the cake is apparently part of the LBGQT community, and there’s a high likelihood that someone working at Whole Foods is at least someone with an established history of being a Good Liberal or outright socialist, if not an active LBGQT activist of some sort.

        Like

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