In every month from August through November, NAHB’s reading on homebuilder sentiment came in at record highs. That streak was bound to come to an end eventually, and it happened this month. The December reading released today was expected to decline from a record of 90 down to 88. Instead, the drop was even larger as the index fell to 86.  Although lower, that is still the second-highest reading on record dating back to 1985.

Each of the sub-indices were also lower this month with the declines in the bottom decile of all monthly moves, though again, the indices remain at historically strong levels in the top 1% of all readings.  For the sub-index that tracks present sales, just like the headline number, the four-point decline in December hasn’t done much damage as it was also still the second-highest reading on record.  The indices for future sales and traffic likewise fell an identical four points.  For future sales, the decline only brings it back to where it stood in September and the index for Traffic is at the lowest level since August. Those are the third and fourth highest readings on record, respectively.

The picture also remains strong based on regions in spite of broad declines.  While every region experienced a decline, the West’s was the smallest. Additionally, the index for the West is the highest of the four regions.  The Northeast, on the other hand, has the lowest reading for sentiment, though, it too is in the top 2% of all readings.

Elsewhere in housing data today, the MBA’s weekly mortgage application data showed another uptick in purchase applications.  Purchase apps rose 1.8% week over week, and while still off the highs from the last week of November, purchases are running at the strongest level in over a decade.

Even though this data remains broadly strong, homebuilder stocks have not been reflecting it.  As shown below, the S&P 1500 Homebuilders group has yet to take out its October 15th high, currently trading 11.51% below that level.  Since that high, the index has also fallen below its 50-DMA with multiple failed attempts to move back above. In fact, of the 43 trading days since that high, the group has closed below its 50-DMA on all but 10 days. While that paints a somewhat negative technical picture, on the bright side, the group has yet to make a lower low. Click here to view Bespoke’s premium membership options for our best research available.

Bespoke co-founder Paul Hickey appeared on CNBC’s Closing Bell yesterday on Monday to discuss the market outlook in a post-vaccine world.  To view the segment, click on the image below.

With today’s close, the VIX has now stuck above 20 for 207 trading days and counting. That marks the fourth-longest streak since the inception of the volatility index, and is approaching the late-1990s and early-2000s record runs. The index was above 20 for 239 trading days through the end of June 1999, and 236 trading days through May 8th, 2003. Of course, from 2008 to December 21st of 2009, the VIX was over 20 for 331 trading days (more than a year).

Surprisingly, the current VIX streak has had an average reading higher than the two longer streaks in 1999 and 2003. The average 32.0 reading over its course so far is second only to the streak recorded over the global financial crisis. It’s also interesting to note that at this stage in the streak (207 trading days), the current run has a higher reading than the three streaks which actually lasted longer.

The New York Fed kicked off the slate of December manufacturing data this morning with the release of the Empire State Manufacturing Survey. The release was expected to come in at the same level as last month (6.3), but instead, moved lower down to 4.9.  The index remained positive meaning the survey’s results were again consistent with growth, just at a slightly lower rate than expected. Even though current conditions have not been improving rapidly, respondents generally remain optimistic for the future.  The index for expectations six months out was slightly higher at 36.3. While higher, it is off the highs from just a few months ago still at more optimistic levels than were observed over the last couple of years.

Even though the headline index fell 1.4 points this month, breadth in the report was fairly strong. Most indices were higher relative to November with the only two indices declining being those of New Orders and Prices Received.  Meanwhile, only two indices—those for Unfilled Orders and Inventories—showed contractionary readings in December which is no different from last month.  Granted, both of these indices also showed less of a contractionary picture. Expectations readings for the same indices, on the other hand, were more mixed with around half lower month over month.

One of the two indices to decline in December was New Orders.  The decline was small though as the index dropped just 0.3 points to 3.4.  Outside of August’s contractionary reading, that is the lowest reading for New Orders in the past six months. Granted, the positive reading meant new orders have now risen for four straight months, albeit at a slower pace in November and December.

As New Orders continue to grow, Unfilled Orders are getting worked off.  The index for Unfilled Orders has remained in contraction for every month since April now. This month’s reading of -3.6 was the second-highest reading of that period behind July’s reading of -0.6.  The expectations index, though, remains much more optimistic.  25.7% of respondents reported that they expect unfilled orders to be higher in six months compared to 11.4% reporting they expect orders to be lower.  That resulted in the index rising to 14.3, the highest since February of 2018. The 9.7 point increase was also the largest one month move in expectations since November of last year.

With businesses meeting demand, inventories have continued to decline.  The index for Inventories has now been in contraction for nine consecutive months. Granted, this month saw the index move higher from -8.6 to -4.3. That means inventories have continued to decline but at a slower pace in December.  Similar to unfilled orders, there is also quite a gap between current conditions and expectations.  The index for future expectations rose to a reading of 15 in December.  That is the second-highest reading on record behind January of 2018’s high of 20.3.  In other words, even though inventories have declined for nine straight months, firms are not anticipating that to continue.  Nearly 30% of responding firms reported that they expect inventories to rise in six months’ time.

While there were more improvements in demand and inventories were lower, prices for inputs have been on the rise.  The index for Prices Paid rose 8 points to 37.1 in December.  Expectations for Prices Paid likewise moved higher reaching the highest level in two years. Prices Received are not experiencing the same degree of upward pressure though.   The index for Prices Received fell in December from 11.3 to 10 which is a much more modest reading overall. That is not to say it will continue to be that way.  Expectations for Prices Received rose to a reading of 30, the highest level since February of 2018.

In spite of the rise in COVID cases, the report’s readings on employment were pretty strong.  The index for the Number of Employees rose to 14.2 which was a two-year high while the index for the Average Workweek was unchanged at 4.8. So New York area manufacturers are not only hiring at their fastest rate since the end of 2018, but they are also increasing working hours. Click here to view Bespoke’s premium membership options for our best research available..