Morning Report: Homebuilder Confidence Declines

Vital Statistics:

S&P futures3,878-0.25
Oil (WTI)75.74 1.54
10 year government bond yield 3.57%
30 year fixed rate mortgage 6.26%

Stocks are flattish as we head into a week of light trading. Bonds and MBS are down.

The week should be quiet ahead of the holidays, however we will get a lot of housing data with existing home sales, housing starts, and new home sales. We will also get the third revision to last quarter’s GDP and personal incomes / spending.

Speaking of GDP, this is interesting. The Philadelphia Fed took a look at the jobs created in the second quarter of 2022. According to government estimates, the economy added over a million jobs in the April, May and June of this year. Using more comprehensive data, the Philly Fed found that job growth was barely positive – only about 10,000 jobs were added.

This highlights how difficult the Fed’s job is. While the inflation numbers are the motivating factor for Fed policy, the strength of the labor market has been the justification for its hyper-aggressive policy of sequential 75 basis point increases. If the labor market isn’t as tight as the Fed thinks, then it has probably overshot at this point.

That said, when you look at the preponderance of the labor data out there, this Philly estimate looks like the outlier. The labor market is indeed tight when you look at job openings, the unemployment rate and wage increases.

The Freddie Mac Multifamily Apartment Investment Market Index declined 5.4% in the third quarter. “Rising mortgage rates continue to fuel a decline in the Apartment Investment Market Index,” said Steve Guggenmos, vice president of Research & Modeling at Freddie Mac Multifamily. “Property prices and net operating incomes, although positive, are now decelerating, further fueling the decline. Multifamily fundamentals remain consistent and strong, but there’s no question that higher rates are having an effect.”

Homebuilder confidence fell ever single month in 2022, according to the NAHB / Wells Fargo Housing Market Index. In December, the index fell 2 points to 31, which is the lowest since 2012 if you exclude the pandemic-related decline in mid-2020.

“In this high inflation, high mortgage rate environment, builders are struggling to keep housing affordable for home buyers,” said NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga. “Our latest survey shows 62% of builders are using incentives to bolster sales, including providing mortgage rate buy-downs, paying points for buyers and offering price reductions. But with construction costs up more than 30% since inflation began to take off at the beginning of the year, there is little room for builders to cut prices. Only 35% of builders reduced homes prices in December, edging down from 36% in November. The average price reduction was 8%, up from 5% or 6% earlier in the year.”

7 Responses

  1. The lawless judiciary of the left strikes again.

    The North Carolina Supreme Court, which is elected and currently comprised of 4 Democrats (including 2 lame ducks whose term ends in 2 weeks) and 3 Republicans, just issued a ruling invalidating a voter ID law on the grounds that it is a violation of the NC state constitution. The thing is, though, the legislation itself was passed in order to implement a constitutional amendment that was passed in 2018. You can’t make this stuff up.

    In 2018 an amendment to the state constitution was passed and added to the state constitution. It reads:

    Voters offering to vote in person shall present photographic identification before voting. The General Assembly shall enact general laws governing the requirements of such photographic identification, which may include exceptions.

    Again, this is now part of the state constitution. In response to this amendment, a law was passed that stipulates which IDs are acceptable, establishes the provision of a free voter ID for anyone who wants one, and sets out the exceptions that are allowed. And the NC Supreme Court just ruled that it is “unconstitutional” (on the predictable grounds of “disparate impact” violation of equal protection), despite the fact that the constitution explicitly requires exactly what the law provides.

    Essentially the court has all but declared that the state constitution violates the state constitution. Like I said, you can’t make this stuff up. Leftists in the judiciary have no intellectual shame whatsoever. There is literally no illogical leap they will not take in order to achieve their preferred outcomes.


  2. Sure, why not?


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