“Davidson” submits:

The MCAI (Mtg Credit Availability Index) remains well below 300-400 levels which was  beneficial for new single-family home construction-see MCAI chart. In 2004 credit spreads(T-Bills vs. 10yr Treas) were 300-400bps. Today spreads are no better than 220bps and mtg availability reflects this. Add to these low credit spreads the 2-3x higher regulatory expense (some have argued that actual regulatory expense is over 10X higher today than 2004) and it should be simple to comprehend why we do not have a more robust single-family residential construction climate. Looking at All Employees: Construction: Residential Building chart, employment remains well below peaks of previous housing cycles.

 

Yet, BLS Job Openings: Total Non-Farm and the Gallup Job Creation Index show labor demand at all time highs-see charts. Economic expansion continues.

 

What is next?

My guess is that 10yr Treas and mtg rates will likely rise as investors respond to rising employment and expanding economic activity. That is, investors will likely sell bonds to buy stocks as stocks continue to rise. This will force mtg rates higher, widen credit spreads and result in breaking the mtg logjam thus proving very stimulating to housing markets and provide additional boost to employment.