Morning Report: Housing starts remain sluggish

Vital Statistics:

Stocks are higher this morning on no real news. Bonds and MBS are down.

We are starting to see a slowdown in consumer spending as the Fed’s drastic tightening cycle begins to gain traction on the economy. Yesterday, Home Depot reported weaker earnings, particularly on big-ticket items like grills and furniture. Today, Target reported first quarter earnings, and forecasted low single-digit comps for the rest of the year. Consumers are buying more non-discretionary items and buying fewer discretionary items. This comports with studies that show consumers are saving more amidst fears of a recession.

Housing starts rose 2.2% MOM to a seasonally-adjusted annual rate of 1.4 million. This is a 2.2% increase from March, but is down 22% from a year ago. Building Permits fell 1.5% MOM and 21% YOY to a seasonally-adjusted annual rate of 1.4 million.

Western Alliance gave an update on deposits after the close yesterday. Deposits have increased by $2 billion since the end of Q1. Insured deposits are over 79% and the company is close to completing the sale of about $3 billion in loans held for sale. The stock is up 13% pre-open.

Mortgage Applications decreased 5.7% last week as purchases fell 4.8% and refis fell 8%.

Mortgage rates increased last week even as Treasury yields were essentially flat, with the spread between the two rates widening to 310 basis points. Mortgage application activity slowed, as most mortgage rates in the survey increased, with the 30-year fixed rate jumping nine basis points to its highest level in two months at 6.57 percent,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications decreased 5 percent to its slowest pace in a month, as buyers remain wary of this rate volatility, but also as for-sale inventory in many parts of the country remains scarce. Refinance applications accounted for 27 percent of all applications and dropped almost 8 percent last week. Most borrowers have lower rates on their mortgages, and those who are in the market are extremely rate sensitive.”

You can see the difference between the 30 year fixed rate mortgage and the 10-year in the graph below: We are back at levels last seen during October and the Great Recession:

Prior to the Great Recession the last time spreads were this high was the early 1980s.

8 Responses

  1. Honestly I didn’t think the Republicans were going to be able to play their hand this well.

    “McCarthy’s big breakthrough

    Analysis by Leigh Ann Caldwell and Theodoric Meyer with research by Tobi Raji
    May 17, 2023 at 6:05 a.m. EDT”

    And Krugman is appropriately disappointed in Biden.


    • Trust me, it will be promises of stuff later for debt ceiling rise now. This, in my opinion is all kabuki.


      • Oh of course. Same as it ever was, with “cuts” meaning slowing the rate of increased spending, if even that.

        But it is funny to watch Biden and the Democrats climb down from the “no negotiations over the debt ceiling” position.


  2. The cost of FIDO:

    “In his paper, Campbell readily acknowledged that these two numbers — 200 fewer lethal police shootings, more than 3,000 additional civilian homicides — raise questions about “the social welfare implications of B.L.M. protests.””


    • Black Lives Matter protests reduce police violence. Homicides have risen. How do we make sense of it all?

      It’s a Scooby-Doo mystery!


  3. Good discussion of whether or not Trump and/or CNN are liable for defamation due to his repeating his denials of his assault on E. Jean Carroll after being found liable.


  4. DeSantis on the Russian Collusion Hoax


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