Tradex Global Commentary: Housing Starts

TRADEX GLOBAL INTERNAL COMMENTARY

Housing starts dropped 4.8% to a 708k annual rate in May.  The prior month’s rate was revised up to 744k, the highest annual rate since October 2008.  Although the headline number dropped, single-family starts rose 3.2% and building permits rose 7.9%.  Building permits are often viewed as a leading indicator, and the strong number is very encouraging for the US economy.  Affordability remains at all-time highs, driven by cheaper homes, low mortgage rates and more stability in household income.  On a relative basis, these numbers are strong, but working through the distressed inventory is most important before we can make a significant next step.  The reaction to the Greek election seems to have been benign, but the market has quickly moved on to Spain; our hedges are large, but very tail focused…Keep Nimble – Richard Travia

EXTERNAL RESEARCH COMMENTARY 

Builders broke ground on more single-family houses for a third consecutive month in May and rising construction permits pointed to further gains, showing the residential real-estate market is weathering the U.S. economic slowdown. Work began on 516,000 one-family houses at an annual rate last month, up 3.2 percent from April and the most this year, the Commerce Department reported today in Washington. A slump in construction of apartments, which is often volatile, led to an unexpected drop in total housing starts. Building permits, a proxy for future construction, climbed to the highest level since September 2008, showing the combination of lower prices and record-low mortgage rates is underpinning demand and encouraging new projects. Toll Brothers (TOL) Inc. is among homebuilders benefiting from an improving housing market on rising demand for move-up homes. “We saw a very strong number in new permits, indicating builders are seeing improving demand,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. The report “was a lot better than the headline number would suggest.” Total starts dropped 4.8 percent to a 708,000 annual pace in May from a revised 744,000 rate in the prior month that was the highest since October 2008, today’s report showed. The median forecast of 77 economists surveyed by Bloomberg News called for a 722,000 rate. Estimates ranged from 685,000 to 750,000. Building permits increased 7.9 percent to a 780,000 annual rate, reflecting gains in single-family and multifamily homes.

Tradex Global Advisory Services, LLC

investorrelations@thetradexgroup.com 

203-863-1500

@Tradex_Global