Overall backdrop for the housing sector remains solid.
12-month average levels are still rising, which signals a recession is still not on the horizon.
Housing stocks may be due for a breather here in the short-term.
Chart of the Day:
Although this morning's housing data was weaker than expected, the overall backdrop for the sector remains solid. For starters, despite an eight-year recovery in the sector, current levels of starts are only now just at levels that were typical closer to the depths of prior recessions than at the peak of an expansion. Going back to 1959, the average monthly level of starts has been 1.438 mln on a seasonally adjusted annualized rate (SAAR), which is more than 22% above the current level for April. What makes current levels even more extreme is that they don't even take population growth into account. Adjusting for the increase in population over time, US Housing Starts would need to be closer to 1.9 mln SAAR. That's more than 60% above current levels. This isn't to suggest that we think Housing Starts should be closer to 2 million, but it is easy to argue that Starts have plenty of room higher to run.
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