 Hard to find a silver lining in this data.
Housing starts in May fell to a 593,000 annual rate, according to numbers released this morning, June 16, by the Department of Commerce. That was a 10% drop from April’s annual rate of 659,000. The April rate itself was revised downward from 672,000. The drop was the biggest since March 2009.
Building permits, an indicator of future housing starts, fell to an annual rate of 574,000. That’s a one-year low.
 Economists had been expecting that housing starts and building permits would both fall because government subsidies to home buyers expired at the end of April. Under the program home buyers had to sign a contract by the end of that month to qualify for a credit of up to $8,000.
 But they hadn’t expected starts and permits to fall quite this sharply.
 The median estimate among 78 economists survey by Bloomberg News was for housing starts to drop to a 648,000 annual rate. The rate actually came in 55,000 or 8.5%, lower.
 I’d expect that we’ll now see inventories of new homes for sale start to climb again. Sales of new homes had climbed in April reducing the number of new homes on the market to the lowest level since 1968.
 Of course, the current inventory is so low because builders had been cutting back on construction as demand remained sluggish in good months or actually fell.
 I don’t think this data will make the stock market happy today.
ogowon, I don’t know of any research on seasonal patterns in non-U.S. market. All the U.S. research (you can find it in The Stock Trader’s Almanac) sticks to big U.S. indexes such as S&P 500 or to U.S. market sectors. I suspect, without any rigorous data search, that the answer will depend on the degree of correlation between U.S. and emerging markets during the period you look at. Right now I’d say that the markets are less correlated than it seems simply because China is the big driver of emerging market stock prices and right now it’s in a bear. But China has been in a market downturn since last November and the U.S. market has done quite well during much of that time.
Some of the above comments do cross the line. I think we can disagree without calling each other names. If you can’t, please take it somewhere else. I’m reluctant to ban or delete anybody or anything but I will if folks can’t police themselves. I don’t think you convince anyone by insulting them.
EdMcGon,
Thanks for the response.
I have been looking at Heath releated REIT, (after I get out of my energy MLP , soon i think. ), I will make sure I dig deeper and not just buy based on yield.
thanks again.
phillip e,
As the real estate market takes a hit in value, the property values underlying many property-based REITs will also take a hit. In addition, with all the retail investors hopping into this market for the dividends now, they will drive these REITs down when they try to hop out.
Long term, as rents start to come down, rent-based REITs will have to start cutting their dividends too.
Ed,
For those of us who missed the investment related information in todays postings;
“…, you might want to reconsider. Your principal is about to take a hit.” & “..property based REIT..”
Is this because of downsize of principal? or is there another reason for your warning?
Thanks
I read in a book years ago that housing starts over 1 million is a sign of inflation. Now it was a real old book (I’d guess 80’s) but is 1/2 million on the housing starts that bad? And would 1 million still be a sign of inflation today?
sigli,
good luck having kids if that’s what they call affordability housing. I know I had to do a whole lot of no (just say no like I learned in school) people were ready to sell me that crazy house and say but the monthly payment is only.
That’s why my mortgage is only 15% of my pay!
Maybe they should do more teaching people how to manage money then bury them in dept.
I don’t think we should compare housing price drop to the stock market drop as everything doesn’t adjust together. Based on an average family income of $52k/yr, and affordable housing somewhere around 2.75X, you’re looking at something like $143,000. I’d adjust that up a good amount for low interest rates, then make other adjustments based on tax policy, etc. I’ve seen house affordability indexes at all time highs, but good luck try to figure out exactly what they’re saying.
It did get the sarcasm in the post above. However, not everyone gets sarcasm and it can be difficult to get while reading email or blogs. Just be careful.
I don’ think housing has really come down enough. I am not surprised at numbers showing housing is struggling. If you look at the stock market which is at 1998, 1999 level it does not make scence that housing would be at 2002, 2003 levels. Much of this was stated as a result of the housing bubble yet housing has not fallen as much as the stock market. When housing was rising in the bubble I did not hear a lot of people say we needed to cool housing by raising interest rates. Well, while housing grew it locked many young people out of buying a house because salaries did not keep pace. Sure, a young person could have got the house will some crazy mortgage dreamed up by wall street. Housing has to fall in line with salaries of the middle class.
Children, children…please!
How about if we all show Mr. Jubak a bit of respect and courtesy on HIS site, and refrain from everything but market and financial discussions here?
Perhaps we could emulate the gentlemen [and ladies] of former days and refuse to discuss politics or religion, personalities, ethnicities or nationalities in public…especially whilst hiding behind the protective anonymous masks of these noms de guerre, like so many nightriders.
It’s difficult enough just with all the diverse opinions on investing matters…but that is what makes a market, right? Frankly folks, the rest is of no interest- except to you.
Now, what was it someone said about getting it in the shorts, Ed? Are you still alive there?
Full Disclosure: I’ve taken a cheap shot or two, here, yes [mea culpa]- and I do not have the correct outlook on life for going against the grain, short-term. I leave that to stronger and more focused constitutions.
Gallop which is quite left-leaning had a poll recently saying that the majority (I forgot the %) of American thinks “terror and government debt are the two biggest threat to America”. I guess this majority of American fits your definition of “anti-government”.
Pull out some real evidence to show which of my comments is “anti-government”! I thought US had not turned into Hugo Chaviz land yet.
Folks:
I guess it makes no sense to argue with people who can only balk. I did not mean to insult our four-legged friends. But I do know many of our four-legged friends make more contributions to our society than some of the two-legged one.
drmdrd:
Thanks.