Housing starts, building permits dip as builders, buyers await lower rates
Nasdaq, S&P 500 higher, Dow dips
Comm Svcs leads S&P sector gainers; Energy down most
Euro STOXX 600 up ~0.2
Dollar lower; crude off >2%; gold passes $2,700; bitcoin up >2%
U.S. 10-Year Treasury yield dips to ~4.07%
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HOUSING STARTS, BUILDING PERMITS DIP AS BUILDERS, BUYERS AWAIT LOWER RATES
Homebuilders and would-be homebuyers are sitting this one out, biding their time until Fed rate cuts translate to normalized mortgage rates.
Groundbreaking on new U.S. homes edged down by 0.5% last month to 1.354 million units at a seasonally adjusted annualized rate (SAAR), according to the Commerce Department.
While that's a slight pull-back than August's downwardly revised 7.8% surge, the number lands just a hair above the 1.350 million units analysts expected.
Building permits, among the more forward-looking housing market indicators (and a constituent of the Conference Board's Leading Index, expected on Monday), dropped 2.9% to 1.428 million units SAAR, or 2.2% shy of consensus.
Drilling down, single-family starts and permits actually grew by 2.7% and 0.3%, respectively, but those gains were offset by weakness in the volatile multiple-unit space.
Elevated interest rates have been a barrier to entry for many potential homebuyers, particularly at the lower end of the scale.
And now, with the Fed having embarked on a rate-cutting phase, many potential buyers could very well be standing on the sidelines, waiting for rate cuts to translate to meaningfully cooler mortgage rates.
The report fits nicely with the NAHB's homebuilder sentiment data released on Thursday, which reflected an improving - though still pessimistic - outlook among builders.
"Elevated borrowing costs remain an obstacle for builders financing projects, despite the Fed’s initial rate cut. High mortgage rates and borrowing hurdles continue to restrain buyers," writes Carl Weinberg, chief economist at High Frequency Economics. "For builders and buyers, the promise of more rate cuts to come will encourage delaying new construction projects and purchases."
Of course, the most forward-looking housing indicator of them all is the stock market, as it reflects where investors expect the sector to be six months to a year down the road.
Over the last 12 months, the S&P 1500 Homebuilding index .SPCOMHOME and the Philadelphia SE Housing index .HGX have jumped by 85.1% and 68.5%, respectively, compared with the broader S&P 500's .SPX still-impressive 35.4% advance over the same time period.
As of Thursday's close:
(Stephen Culp)
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early snapshot https://tmsnrt.rs/3NxoO0G
Housing starts and building permits https://reut.rs/409wptH
Housing stocks https://reut.rs/3BOaWwt
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