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New Home Construction Highest Post-Lehman. But Still Wobbly.
Rates holding lows again today after two days of Bernanke testimony on Capitol Hill. Some ok housing news this week so far, but other macroeconomic concerns continue driving the prolonged mortgage bond (MBS) rally—rates drop when MBS prices rise. Here’s a rundown of today’s housing data…
Housing Starts June 2012 – aka new construction
- Starts 760,000. Up 6.89% from previous 711,000.
- Permits 755,000. Down 3.7% from previous 784,000.
Starts were improved and, in fact, at the highest level since October 2008—the month after Lehman went under. The downturn in Permits indicates the tenuous state of housing.
We need 1,500,000 Housing Starts per year to keep pace with population growth. That means that either the number of people/household will increase or we will have a housing boom when there is economic recovery. According to RealtyTrac, Notices of Intent to Foreclose were up 6% in 2Q2012. Is the shadow inventory coming out of the shadows?
Here’s a good Briefing.com chart that puts things into perspective:
Mortgage Applications (week ended 7/13/2012)
- Purchase Index, Week/Week -0.1%
- Refinance Index, Week/Week +22.0%
- Composite Index, Week/Week +16.9%
Refinance applications are rate driven and the record low rates of last week produced this spike. The purchase applications number is disappointing. Refinancing is an economic stimulus. Not only does it make money for folks in the mortgage business but refinancing in the past three years has freed up at least $50 billion a year in cash that borrowers can now spend. The recent wave or refinancing will drive that number up. This $50 billion will be there every year. Here’s a good WSJ piece with more.
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