The last Housing Market Review covered data released in February, 2016. At the time, sentiment and data ahead of the Spring selling season was not as strong as I had anticipated. The iShares US Home Construction ETF (ITB) has gained little since then and has even stalled out at resistance at its 200-day moving average (DMA). Under the circumstances, combined with an overbought market, I decided to take profits in a little over half of my holdings in individual home builders. On a seasonal basis, taking some profits off the table also makes sense (see below).
200DMA resistance held firm on ITB this past week.
Source: FreeStockCharts.com
New Residential Construction (Housing Starts) – February, 2016
Housing starts were blistering in February. The pace continues to surprise me given these are homes that will likely be for sale well after the Spring selling season. The pace of starts also still seems a bit out of sync with the sentiment of home builders.
Privately owned housing starts for 1-unit structures came in at 822,000 for February. The January 1-unit starts were revised upward to 767,000 from 731,000. So, the month-over-month change was 7.2% which created an incredible 37.0% year-over-year surge in starts. The chart below shows the blistering pace of housing starts, a pace that has picked up in recent months.
Housing starts continue to streak higher on an annualized basis.
Source: US. Bureau of the Census, Privately Owned Housing Starts: 1-Unit Structures [HOUST1F], retrieved from FRED, Federal Reserve Bank of St. Louis, March 26, 2016.
The South led the regions in January but lagged in last place for February with “only” a 19.5% year-over-year gain. The Northeast led the pack with a 154.5% year-over-year gain. The Midwest surged 88.9% and the West came in third at 32.4%.
The overall trend and momentum for housing starts continue to impress me.
New Residential Sales – February, 2016
New single-family home sales came in weak again at 512,000. The 6.1% year-over-year drop was greater than January’s year-over-year decline. The 2.0% monthly gain provided a small reminder that 2015 started with a tremendous surge in new home sales which makes for difficult comparisons. This latest data point tells me even more strongly than last month that a monthly range is likely developing for sales. Given the increasing pace of housing starts, this sales rate will need to break out of this range to the upside in coming months.
