Data on residential housing this morning surprised to the upside at the headline level in terms of both Building Permits and Housing Starts.  Despite the better than expected results, the internals of the report weren’t great as all of the strength was in multi-family units.  In fact, single-family Building Permits were only up 0.6% m/m and were down -0.1% y/y compared to a m/m gain of 15.8% and a y/y gain of 44.3% in multi-family permits.  Similarly, single-family Housing Starts actually declined 2.8% m/m and only increased 5.2% y/y compared to multi-family units which rose 20.6% m/m and 52.7% y/y.  An increase in multi-family units isn’t necessarily considered a bad thing, but single-family units tend to have more of an economic impact.

Overall, Housing Starts are still trending higher.  On a 12-month moving average basis, Housing Starts have been surging in recent months and just came in at the highest level since May 2007.  Housing data tends to roll over well in advance of recessions, so as long as Starts keep trending higher, it’s a sign of economic strength.

Looking more closely at single-family Building Permits and Housing Starts, the 12-month moving average of this metric has actually been starting to flatten out in recent months. Housing has been a pillar of the economy in the post-pandemic rebound, so this will bear watching going forward.

It’s always interesting to see how closely homebuilder stocks tend to track trends in Housing Starts, which we show below.  Similar to the stall out in starts, we’ve also seen the iShares Home Construction ETF (ITB) start to stall out over the last few months. Click here to view Bespoke’s premium membership options.

Salesforce.com (CRM) kicks off its annual Dreamforce conference today. This is the 19th year of the event in which the company showcases its products and hosts various presentations by industry leaders. Like many conferences, in-person attendance is limited again this year with the event streamed online over the next few days. Unlike last year, the conference is back to its usual length of only a few days compared to the 2020 event that went on for nearly a month.  The Dreamforce conference typically occurs in the fall but has happened as early as the end of August and as late as early December.

As for how Dreamforce impacts the stock, below we show how CRM’s performance leading up to, during, and after each year’s conference.  The stock pretty consistently trades higher around the Dreamforce conference. If you exclude last year when the conference lasted for a much longer period of time, and the Slack takeover acted as a negative catalyst, CRM tends to move higher during the conference. The only notable period of weakness is the week after the conference ends.  That period has averaged a 0.93% decline with positive performance less than half the time. Longer-term performance, though, has been more consistent to the upside. Note that because of the extended length of Dreamforce in 2020, performance figures at the bottom of both tables do not take 2020 performance figures into account.

Salesforce.com is a giant in the Tech sector ranking as the eighth largest stock in the S&P 500 Technology sector.  As such, the stock’s performance does hold some weight on the broader market.  Below we replicate the table above but with the performance of the S&P 500 Tech Sector ETF (XLK). As with CRM, XLK has typically rallied leading up to the conference, but it tends to underperform CRM during the conference falling 20 bps on a median basis during the few days the event takes place versus CRM’s median gain of 0.51%.  Following the conference, like CRM, XLK’s short-term performance over the next week is mixed to negative, but one, three, and six months later the stock has traded higher more than two-thirds of the time.Click here to view Bespoke’s premium membership options.

The NAHB released its September reading on homebuilder sentiment this morning.  Rather than another decline down to 74 that was expected, the headline reading surprised to the upside coming in slightly higher at 76. We are now approaching the one-year anniversary since homebuilder sentiment peaked at its record high of 90 from last November.  While little progress has been made in working back up to that high, the current reading remains at one of the strongest levels on record.

Both Present Sales and Traffic drove the headline index higher this month with the latter seeing the larger move higher of the two.  Future sales, on the other hand, went unchanged for the second month in a row.  Just like the overall market index, each of these components has pulled back from last November’s highs but remain at historically strong levels.

There was a more significant movement based on geography.  Starting with the bad news, the Northeast and West experienced particularly large declines of 9 and 5 points, respectively.  After that decline, sentiment in the Northeast is at the weakest reading since June of last year and the month-over-month decline ranks in the bottom 2% of all monthly moves. The drop in sentiment in the West similarly was one of the largest declines on record.

Meanwhile, the Midwest and South had much stronger showings this month.  Not only were the indices for both of these regions in the top decile of all periods, but they also showed significant improvement in September.  The 5 point uptick in the Midwest index ranks in the top decile of all moves while the 3 point increase in the South narrowly missed a 90th percentile move. Click here to view Bespoke’s premium membership options.