Getting the house in order: Housing starts/permits, mortgage demand
Nasdaq edges higher; S&P ~flat; Dow dips
Tech leads S&P 500 gainers; materials weakest group
Euro STOXX 600 index off ~0.4%
Dollar, gold ~flat; crude slips; bitcoin dips
U.S. 10-Year Treasury yield rises to ~3.69%
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GETTING THE HOUSE IN ORDER: HOUSING STARTS/PERMITS, MORTGAGE DEMAND
A one-two punch of bullish housing data released on Wednesday appears to herald the dawn of a new low interest rate era.
Groundbreaking on new American homes USHST=ECI increased in August by 9.6% to 1.356 million units at a seasonally adjusted annualized rate (SAAR).
That's 3.5% north of consensus and marks a solid rebound from July's 6.9% slump, which was attributable, in part, to Hurricane Beryl.
The report from the Commerce Department also showed building permits USBPE=ECI - considered among the more forward-looking housing market indicators - rose by 4.9% to 1.475 million units SAAR, beating analyst expectations by 4.6%.
The better-than-expected data appears at odds with the pessimistic NAHB data released on Tuesday.
"While the improvements seen in both the starts and permits data don't align with stagnant homebuilder sentiment, it does align very well with falling mortgage rates," writes Daniel Vielhaber, economist at Nationwide. "Rates fell further in September, so we could see home construction continue to pick up in the coming months."
Speaking of mortgage rates, the cost of financing home loans eased a bit last week, prompting a surge in mortgage applications.
The Mortgage Bankers Association's (MBA) average 30-year fixed contract rate USMG=ECI dropped by 14 basis points to 6.15%, its lowest level since September 2022.
As a result, demand for loans to purchase homes USMGPI=ECI and refinance existing mortgages USMGR=ECI jumped by 5.4% and 24.2%, respectively.
Taken together, total applications jumped 14.2%.
Application activity was up significantly last week, as market expectations of a rate cut from the Fed pulled mortgage rates lower," says Joel Kan, MBA’s deputy chief economist. "Homebuyers are seeing improving affordability conditions, sparked by lower rates and slower home-price growth."
Compared with the same week last year, the 30-year fixed rate has cooled down by 1.16 percentage points. Purchase applications - also eyed as a leading housing indicator - are now off only 0.6% over that same time period, while refi demand is up a whopping 126.6%.
While building permits and applications for loans to buy homes do indeed provide a snapshot of where the housing market could be a month or two down the road, the stock market is arguably more forward-looking, as it tends to reflect where investors expect the sector to be six months to a year in the future.
With that in mind, over the last 12 months, the S&P 1500 Homebuilding index .SPCOMHOME and the Philadelphia SE Housing index .HGX are up 67.5% and 53.1%, respectively.
That compares with the broader S&P 500's still impressive 26.5% advance over the same time period.
(Stephen Culp)
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FOR WEDNESDAY'S EARLIER LIVE MARKETS POSTS:
WALL STREET STALLS AT STARTING LINE AS INVESTORS HOLD THEIR BREATH FOR FED - CLICK HERE
MOMENTUM OUT FRONT, BUT IS THERE A SHIFT AFOOT? - CLICK HERE
THE UNBEARABLE WRONG-NESS OF FED WATCHING - CLICK HERE
SOFT LANDING TO BENEFIT GROWTH STOCK LAGGARDS - UBS CIO - CLICK HERE
WHAT NEXT AFTER THE FIRST FED CUT? - CLICK HERE
ALL GOOD FOR EURO AREA LIQUIDITY… FOR NOW - CLICK HERE
NOVO WEIGHS, AWAITING THE FED - CLICK HERE
EUROPE BEFORE THE BELL: THE FED, MIDDLE EAST AND UK CPI - CLICK HERE
TRADERS STILL GUESSING IN FINAL FED COUNTDOWN - CLICK HERE
Housing starts and building permits https://reut.rs/47sQUTP
Housing stocks https://reut.rs/3TwI15X
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