The Home Buyer's Korner

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April 16th, 2015

Guy looking up in color

New Home Starts for March 2015

New Home Sales

Housing Starts rose far less than expected in March. If you had been reading earlier post many had been writing articles predicting March was going to be ground-breaking. Companies like RBC Capital Markets upgraded its forecasts for housing starts through 2017 and The Capital Spectator’s expected an increased annual pace of 971,000 units on a seasonally adjusted basis.

The fact is that ground-breaking it wasn’t but, Groundbreaking did, however, increased 2.0 percent to a seasonally adjusted annual pace of 926,000 units, as provided by the most current data from the Commerce Department.

Factory activity in the mid-Atlantic region grew modestly this month, suggesting a Main Street recovery will continue to struggle.

2015 has been a repeat of 2014’s start with the economy stumbling at the beginning of the year, that can be contributed to both years by a harsh winter. What’ different this year is a strong dollar, weaker global growth and an unresolved labor dispute on West Coast ports.

Today’s lukewarm data is just more evidence that the economy simply isn’t strong enough for the Federal Reserve to start raising interest rates before early fall.

While the good news is that starts for single-family homes did rise, the gains made only a small dent on the prior two months’ losses. Permits for future home construction declined 5.7 percent to a 1.04 million-unit pace, however, March was the eighth straight month that they remain above 1 million units. Last month, groundbreaking rebounded sharply in the Northeast and Midwest, which had been affected by cold weather in February. Starts, however, fell in the West and the South, where most of the home building takes place.

historical housing starts chart

In a separate report, the Philadelphia Federal Reserve Bank said orders for manufactured goods fell to its lowest level since May 2013 while shipments remained in contraction territory despite some improvement. Another report on Wednesday showed soft factory activity for New York state in April and all this can be attributed to a strong dollar. Fortunately Janet Yellen, Chair of the Federal Reserve didn’t listen to Wall Street and increase rates, that the 1 percent had been clamoring from just a few months ago with claims that the economy was overheating.

Manufacturing has been slammed by the dollar’s 20 +/- percent increase in the past year, as well as the softer overseas demand and until those issues work themselves out Wall Street needs to stop pushing for any rate increases and let Main Street have a chance to continue its recovery.

Despite recent weak data, the outlook for housing remains favorable, but rates need to remain low and more importantly we need congress to address stagnant wages, while the FHFA fulfills it overdue promise to loosen credit restriction on Main Street for would-be home buyers.

This week we received a report from the Labor Department showing a rise in the number of people seeking unemployment aid last week, but the underlying trend continued to suggest the jobs market is tightening as more long-term unemployed find work.

Initial claims for state unemployment benefits rose 12,000 to a seasonally adjusted 294,000 for the week ended April 11.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose only marginally and remained well below the 300,000 threshold that is associated with a strengthening labor market for a third straight week.

The number of people still receiving unemployment benefits after an initial week was the lowest since December 2000.

Simply put “it’s about jobs”and until Hollywood East and all the fat cats on Wall Street who make rosy predictions without knowing what’s happening with Main Street job opportunities and stagnant wages, housing isn’t going to see a strong comeback.

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