Morning Report: Weak housing starts number

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Stocks are higher this morning on overseas strength. Bonds and MBS are up.


Lots of housing data to chew through. Let’s start with existing home sales, which increased 11.8%, according to NAR. While this month-over-month print of 5.51 million sounds impressive, we are still down on a YOY basis. Lower rates are helping, and we are beginning this season with a little more inventory to work with. We had 1.63 existing homes for sale, which represents a 3.6 month supply. A balanced market needs something like 6 months. Prices are still rising – the median house price rose by 3.6% – but the rate of appreciation has slowed. The median home price came in at $249,500, and that puts the median house price to median income ratio just over 4. Historically that is a high number, but lower interest rates help the affordability issue. The first time homebuyer represented 32% of home sales, an increase from last year but still below the historical average of around 40%.


Housing starts fell 8.7% to 1.16 million, a disappointing number. We saw a huge decrease in single family construction – from an annualized pace of 970k to 805k. Last February, the number was 900k so this is a big drop. One note of caution – the margin for error on these numbers is huge (around 17%), so there is a good chance this gets revised upward in subsequent releases. Building permits were a little better – falling only 2% to 1.3 million. Housing construction has largely been absent from this recovery, and could provide a huge boost to the economy if it ever gets back to normalcy (around 1.5 million units a year).


housing starts


More evidence that home price appreciation is slowing: the Case-Shiller home price index rose 4.3% in January, the slowest pace since 2015. In general, 2018 was a year to forget for the mortgage industry as rates rose 100 basis points. They have now given back most of those gains, so perhaps 2019 will be a bit brighter, although if you have been counting on MSR unrealized gains to paper over weakness in lending, the Q1 mark is going to be harsh.


The economy seems to be slowing, according to the Chicago Fed National Activity Index. It edged downward to -.29 in February, and the 3 month moving average is negative as well. The CFNAI is a meta-index of 85 different economic indicators, of which many are leading as well as lagging. While it is too early to start declaring 2019 a slow-growth year, the first quarter is looking weak.


The FHA is backing away from a 2016 decision to loosen credit – it is now tightening standards and flagging more loans as “high risk.” The biggest effect will be for the first time homebuyer, and FHA estimates that 40,000 loans or so might be affected. At the heart of the issue is a 2016 decision to no longer require a manual underwrite for FHA loans with FICOs below 620 and DTIs above 43. FHA was largely a backwater pre-crisis, and most of these types of loans were subprime. As the subprime market disappeared, FHA stepped in to fill the void. Home Ready and Home Possible have emerged as low downpayment competitors, and FHA has suffered from negative selection bias. While FHA permits very low credit scores, most lenders don’t go as low as FHA permits in the first place.


Trump nominates free-marketer Steven Moore to the Federal Reserve Board and Paul Krugman isn’t taking it well. For a little economics inside-baseball, this resembles the Spacely Sprockets / Cogswell Cogs rivalry in the economics profession. Since most of the free-market caucus comes from the University of Chicago, they are called “fresh water economists” and Krugman comes from Ivy / Coastal academia (Princeton) so his school is called “salt water” economists. In terms of ideological bent, the fresh water economists are much more non-interventionist than the salt water economists, who support direct government intervention in the markets and economy. Steven Moore is a true believer in the free market approach, and to be honest, most of the Fed and academia are not. A little diversity of opinion is not a bad thing….



36 Responses

  1. PL today:

    “Col. Trautman: It’s over, Johnny. It’s over!

    Rambo: NOTHING IS OVER! Nothing! You just don’t turn it off!|”


  2. Even Jacobin gets it:

    “Closing the Russiagate
    By Branko Marcetic

    With the end of Mueller’s inquiry, our long, national hallucination is finally over. But the damage done by neocons and liberal conspiracy theorists is just beginning.”


    • Reading that and the Taibbi piece. It just amazes me that this is the tact the media–clearly insanely biased and I do mean insanely–in trying to get Donald Trump. I cannot imagine that there aren’t a thousand areas where Donald Trump would at least be more vulnerable and come out looking to be the bad guy. Previous business deal (he had to be in worse things than Whitewater over the years), mob connections, mail fraud . . . I can’t imagine a president presenting a greater cornucopia of real things that might either be prosecutable or at least make him look terrible. Real things.

      And where do they go? They fantasize he’s some kind of Manchurian candidate, a Russian spy who colluded with Russia to fraudulently steel the election with $100k in Facebook ads and some leaked emails that shows the Clinton campaign doing what campaigns do, for the most part.

      The whole thing just mystifies me.



    from the Jacobian piece, a link to Taibbi .. but damn:

    Worse, Chait’s theory was first espoused in Lyndon Larouche’s “Elephants and Donkeys” newsletter in 1987, under a headline, “Do Russians have a Trump card?” This is barrel-scraping writ large.


    • Yeah, the Taibbi piece is the definitive take-down.

      Edit: This is a good read too:

      “Russiagate: The Great Tragic Comedy of Modern Journalism
      Matt Bivens”

      View at

      Liked by 1 person

      • The whole part about the groupthink in the newsrooms and fear of speaking out reminds me of a cult.

        Liked by 1 person

        • It’s culty but it’s also natural. As many self-help gurus have warned in various ways, if you don’t weed your garden, the weeds will take over your garden. If you don’t actively pursue balance and objectivity and do everything possible to weed out partisanship and bias, they will come to dominate. If you don’t work actively to avoid tribalism, you will hire and fire and conduct meetings in a way that creates tribalism–in an organization or between departments.

          Although the press seems to believe they are uniquely immune to something they are very clearly in the late, late stages of dying from.


    • Taibbi is doing Yeoman’s work.

      We’re at that next devolution: first and wrong. The Russiagate era has so degraded journalism that even once “reputable” outlets are now only about as right as politicians, which is to say barely ever, and then only by accident.

      I say that mostly because I agree with him. 😉

      But it has to be hard on him to keep insisting on truthfulness in reporting and standards not beholden to ideology or partisanship, however he defines those things. Notable though, that there are a lot of NeverTrumpers on the right trying to keep it real but, so far as I can tell, only Matt Taibbi on the left.


      • It doesn’t take much investigation to realize the main institutional sources in the Russiagate mess – the security services, mainly – have extensive records of deceiving the media

        Taibbi makes a point that’s always struck me. The left has often accused intelligence agencies of lying–for good reason, because they do. It’s their primary function. The sudden blind trust of the left of the supposed “17 intelligence agencies” always kind of mystified me.


        • partisanship’s a hell of a drug


        • Drug is right. The way they approached the story was like they were stoned out of their minds. And sometimes when you’re high, lots of bad ideas do seem like good ideas. And apparently a lot of that happened here.


  4. Latest on the Jussie Smollett case. Charges dropped apparently.

    I don’t get the idea of voluntarily forfeiting your bond and the charges being dropped. Feels a little like paying a bribe to the city to buy your way out. Or being extorted.

    Liked by 1 person

    • The latest development, after Smollett made an emergency court appearance Tuesday morning, raises questions about what led prosecutors to drop the charges and what happened on the night in question.

      um, politics maybe?


    • jnc:

      I don’t get the idea of voluntarily forfeiting your bond and the charges being dropped. Feels a little like paying a bribe to the city to buy your way out. Or being extorted.

      I thought exactly the same thing! What’s up with that? Never heard of it before.

      Liked by 1 person

    • so obama got him off?


    • has anyone ever been convicted of faking a hate crime before? if not, then that is the left’s MO here – to make sure that they can keep the “but nobody has ever been convicted of faking a hate crime, so it is just a figment of the right’s imagination.”

      Liked by 1 person

      • I think the whole notion of a “hate crime” is nonsense, of course. But if we are going to designate anything as “hate crimes”, it seems to me that faking a crime so as to demonise and sow public hatred of a whole demographic of people…like, say, MAGA hat wearing Trump supporters…pretty much fits the bill. Smollet didn’t just fake a “hate crime”. He perpetrated one.

        Liked by 1 person

        • You gotta know if he managed to start a race riot or something, he would have been sooooo pleased.

          You’re exactly right. He perpetrated a hate crime–and if not with provable intent to cause injury or death to others because of their race, with clearly negligence as to what the negative consequence would have likely been had his hoax succeeded.


  5. “The fallback position of Democrats now is that they can get Trump for obstruction for all his impure thoughts about a probe that reached its conclusion unimpeded, and that found no underlying Russian collusion to cover up.”


  6. Really good Federalist Radio Hour today with David Harsanyi and Molly Hemingway, whose critiques of the media coverage of Russiagate over the last two years have been outstanding.


    • why the “media got it wrong” narrative? The media didn’t “get it wrong” – they tried and failed to take down a sitting president

      Liked by 1 person

  7. Because he expects to be running for president in 2024 and things a man on the moon would be a good backdrop?

    I expect there are reasonably good reasons to go back to the moon. If we could send a full construction crew it would be a great place to put a cellular tower. 😉 Or a really powerful WiFi hotspot.


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