Morning Report: Housing starts miss…again

Vital Statistics:

  Last Change
S&P futures 4,435 -6.2
Oil (WTI) 67.42 -2.45
10 year government bond yield   1.28%
30 year fixed rate mortgage   3.05%

Stocks are lower this morning on no real news. Bonds and MBS are flat.


The FOMC minutes will be released at 2:00 pm today. While it probably won’t have much impact on where the 10 year goes, mortgage backed securities will be watching the language regarding tapering closely. Be careful locking around that time.


Housing starts disappointed again, coming in at 1.55 million. Shortages of labor and materials have been a problem, although the lumber market seems to be getting back to normal. On a MOM basis, they fell 7%, and on a YOY basis rose only 2.5%. Don’t forget that July of 2020 was heavily depressed by COVID. Building Permits were a bit better, but that has been the pattern for at least a year – permits look good, but the starts don’t materialize.

Separately, the NAHB / Wells Fargo Housing Market Index (a measure of builder sentiment) decreased to the lowest level in a year.


More evidence that the economy is not accelerating into the end of the year. Retail sales fell 1.1% last month, which was well below Street estimates. Ex-autos and gas, it fell 0.7%. About the only bright spot in the report was restaurants and bars, which increased. We are getting into the critical period of the year with respect to consumer spending, and back-to-school sales are beginning to ramp up.


Industrial Production increased 0.9% in July, while manufacturing production rose 1.4%. Capacity utilization rose to 76.1%


Mortgage Applications fell 4% last week as purchases fell 1% and refis dropped 5%. “Mortgage rates followed an overall increase in Treasury yields last week, which started higher from the strong July jobs report before slowing because of weaker consumer sentiment and concerns about rising COVID-19 cases,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “The increase in mortgage rates caused a 5 percent decrease in refinancing, driven by a 7 percent drop in conventional refinance applications. Even though rates are 7 basis points lower than the same week a year ago, the refinance index is around 8 percent lower. The eligible pool of homeowners who stand to benefit from a refinance is smaller now.”

9 Responses

  1. Biden approval rating sinking.

    I don’t know why, though. He hasn’t been mean-Tweeting, has he? Mission accomplished!


    • If Reinhardt and Rogoff are correct, we have crossed the rubicon on our debt to gdp ratio, and should expect max growth of 2% going forward.

      That is going to eat at his popularity as well, along with the fact that the Twitter Left alienates everyone.


      • Economic growth under Trump, despite heavy currency/debt creation still led to above 2% growth. I tend to think regulation and perception of govt regulation have a greater influence.

        What’s your thinking?


        • no question that government-spending growth is junk GDP, and leftist government acts as a wet blanket on business.


    • There have to be at least a few people now thinking that the mean tweets weren’t all that bad, really.


  2. The dumbest take on this whole thing is, well, Trump cut a deal and Biden is bound by it. i mean, honestly.


  3. The DoD briefing on the current situation in Afghanistan is fascinating.

    Like this:

    Amid questions over what the Pentagon and larger Biden administration knew about the Taliban threat — and when they knew it — Milley pushed back on accountability saying “there will be plenty of time to do [after action reports] but right now’s not that time.”

    I’m sure it’s perfectly ok to let the people who fucked this up try and unfuck it, that has historically worked out well.

    “I have previously said from this podium and in sworn testimony,” Milley explained, that the Pentagon was aware “multiple scenarios were possible” during a U.S. withdrawal from Afghanistan but that “there was nothing that I or anyone else saw” suggesting a collapse like the one we saw last weekend.

    This is incredibly damning. My follow-up question would be “Mr. Secretary, General Milley, was there anyone in your chain of command that did suggest that the Afghan forces would collapse extremely quickly? If not how can you trust their guidance now? If so, why haven’t those people been provided a leadership role?


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