“After all is said and done, more is said than done.”
Aesop probably wasn't referring to analyzing new home starts and purchase activity in 2014, but that quote pretty well characterizes the monthly deluge of commentary and conjecture around dead flat TTM volume trends.
Anyhow, we’ll can the verbosity ahead of the holiday and summarily review today’s trifecta of housing data below.
In short: The balance of recent data has come in slightly north of middling on an absolute basis but housing remains in a tough spot and industry escape velocity remains very much a phantasm. However, from a Rate of Change perspective - given the comp dynamics - most of the data is inflecting positively, a trend which should extend as we traverse volume compares that continue to ease into 2H15.
Purchase Apps: Purchase Demand declined -4.8% sequentially after last week’s notable 11.7% rise (the largest weekly increase in 20 months) but held above the 170 level on the index for a second week. From here, compares ease further into the last weeks of the year and take a second dive into the end of 1Q15
Pending Home Sales: Pending home sales declined -1.1% but, to our point above, accelerated on a YoY basis to +2.2% - the second month of positive YoY growth after an eleven month run of negative sales growth. The soft’ish PHS data the last couple months has diverged from the strength reported in EHS. The two series are invariably tethered so we expect to see a re-coupling in favor of one or the other in the next few months.
New Home Sales: New Home Sales increased for a 3rd month, rising +0.7% sequentially and +2% YoY. Sales were up +14% in 3Q against trough comps but are up just 1.4% YoY for the Jan-to-Oct period. Both Sales and SF starts have been virtually flat over the last year but with NHS above the TTM trend for each of the last 3 months, the slope has shifted from slightly negative to slightly positive.
Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume.
*Note - to maintain cross-metric comparability, the purchase applications index shown in the table below represents the monthly average as opposed to the most recent weekly data point.
Joshua Steiner, CFA
Christian B. Drake