After 39% Collapse Between Jan And Dec ’18, ITB Trying To Stabilize But In No-Man’s Land

US home sales peaked in November 2017, homebuilder sentiment in December 2017, and housing starts in January 2018. From its January 2018 intraday high through December low, ITB collapsed 39 percent. It is trying to bottom, but currently in no-man’s land.

First off, due to the ongoing partial federal shutdown and a lapse in funding, the Census Bureau has stopped publishing data. The last print was on December 21. Several important series such as retail sales, durable goods, housing starts, and new home sales are not being updated.

Thus, to get a read on the prevailing housing trend, we have to rely on existing home sales, which is published by the National Association of Realtors. In December, sales of existing homes declined 6.4 percent month-over-month to a seasonally adjusted annual rate of 4.99 million units. They have been under pressure since reaching a cycle high 5.72 million units in November 2017. In that same month, new home sales reached a cycle high 712,000 units. In October – the last month for which data is available – sales of new homes dropped 8.9 percent m/m to 544,000 units (Chart 1).

Homebuilder sentiment has taken a mini tumble. In December 2017, the NAHB/Wells Fargo housing market index rose as high as 74, which was the highest since 75 in July 1999 (Chart 2). In the next year, it fell 18 points, to 56. This month, it rose a couple of points m/m to 58.

Housing starts similarly have come under pressure  In January last year, they began to drop after reaching a cycle high 1.33 million units (SAAR), before dropping to 1.18 million by June. Starts were up 3.2 percent m/m to 1.26 million units in November.

Starts have more or less gone sideways for over three years now. In the past, whenever a gap has developed between starts and sentiment, the two eventually meet. Even after the recent drop, sentiment remains elevated. If the sharp drop in sentiment is anything to go by, builders do not expect things to pick back up in housing, at least not right away.

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Disclaimer: This article is not intended to be, nor shall it be construed as, investment advice. Neither the information nor any opinion expressed here constitutes an offer to buy or sell any ...

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