Housing Starts | No Fits in (June) Starts .. But Some Caveats

Takeaway: Housing Starts continue to push to new post-crisis highs, though there was some pull-forward that juiced the June numbers on the MF side.

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. 


Housing Starts | No Fits in (June) Starts .. But Some Caveats - Compendium 071715


Today’s Focus:  June Housing Starts & Permits

The Capriole: A sharp pop in multi-family construction and permitting in June led a return to post-crisis highs in Total Starts, a 27-year high in multi-family Starts and a  42-year high in multi-family share of total.  While declining a modest -6K sequentially and decidedly less epic than the +30% sequentially and +48% YoY gain in MF, single-family starts remained near cycle highs at +685K, accelerating to +15% YoY from +8% prior.   


The Caveat:  The sunsetting of tax exemption programs in NYC in June and its role as an exogenous amplifier of multifamily activity has garnered some headlines the last couple months.   The 1st set of charts below from the NYU Furman Center – citing NYC  Building Department data – show a discrete spike in large-scale project permits into the impending expiration.   Along with the outsized magnitude of increase, the data supports the notion that the expiration provided a modest juicing to the June figures. 


The Conclusion:  The trend in SF starts/permits, therefore, probably offers the cleanest read on the underlying level of activity and, with SF starts up +9% in 1H15 relative to 1H14, the trend there remains one of ongoing, moderate improvement.


The Comps: Looking ahead, the comp setup and read-through to reported rates-of-change is very much duration dependent.  In the short-to-medium term, growth comps get decidedly more difficult beginning in July and remain tough through the balance of 3Q.  


From a longer-term perspective, however, new single-family construction and sales remain the most depressed of all activity metrics across both the New and Existing Markets with new construction activity over the last year (i.e. inclusive of the multi-family recovery) barely above trough levels observed across prior cycles.   As it stands, Housing Starts remain at just 45% of prior peak levels.  The immediate-term comp dynamics and longer-term mean reversion opportunity are illustrated in charts 3&4 below.  



Housing Starts | No Fits in (June) Starts .. But Some Caveats - NYU Permits 1 


Housing Starts | No Fits in (June) Starts .. But Some Caveats - NYU Permits 2 


Housing Starts | No Fits in (June) Starts .. But Some Caveats - Comps NHS 


Housing Starts | No Fits in (June) Starts .. But Some Caveats - starts mean reversion oppty to peak 


Housing Starts | No Fits in (June) Starts .. But Some Caveats - Total Starts LT 


Housing Starts | No Fits in (June) Starts .. But Some Caveats - MF Starts   Permits LT


Housing Starts | No Fits in (June) Starts .. But Some Caveats - MF Starts   Permits TTM


Housing Starts | No Fits in (June) Starts .. But Some Caveats - SF Starts   Permits LT


Housing Starts | No Fits in (June) Starts .. But Some Caveats - SF Starts   Permits TTM




About Housing Starts & Permits:

The US Census Bureau records the number of new housing units that have obtained permits for construction and those that have begun construction. This data includes new buildings intended primarily as residential units. The US Census Bureau defines a start as, “Start of construction occurs when excavation begins for the footings or foundation of a building.” 



Joshua Steiner, CFA


Christian B. Drake


Cartoon of the Day: The Blame Game

Cartoon of the Day: The Blame Game - Blame cartoon 9 07.17.2015

"The big 'weather bounce' that the U.S. economy was supposed to see in Q2? It simply did not happen," Hedgeye CEO Keith McCullough recently wrote.


(Just as we predicted)


Click here to subscribe to Hedgeye.

RTA Live: July 17, 2015

Here is the replay of today's edition of RTA Live.



Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

Keith's Daily Trading Ranges [Unlocked]

This is a free look at today's Daily Trading Ranges - our proprietary buy and sell levels on major markets, commodities and currencies sent to subscribers weekday mornings by CEO Keith McCullough. Click here to subscribe.

Keith's Daily Trading Ranges [Unlocked] - Slide1


Keith's Daily Trading Ranges [Unlocked] - Slide2

Keith's Daily Trading Ranges [Unlocked] - Slide3

Keith's Daily Trading Ranges [Unlocked] - Slide4



Keith's Daily Trading Ranges [Unlocked] - Slide5

Keith's Daily Trading Ranges [Unlocked] - Slide6

Keith's Daily Trading Ranges [Unlocked] - Slide7

Keith's Daily Trading Ranges [Unlocked] - Slide8

Keith's Daily Trading Ranges [Unlocked] - Slide9

Keith's Daily Trading Ranges [Unlocked] - Slide10

Keith's Daily Trading Ranges [Unlocked] - Slide11


The Macro Show Replay | July 17, 2015



Client Talking Points


Mario Draghi did the double-whatever-it-takes yesterday and the Euro dove to the low-end of my immediate-term $1.08-1.11 risk range; that finally puts USD Index immediate-term TRADE overbought in what continues to look like a #deflationary redo for certain asset prices, earnings, etc. 


Most obviously you can see this in both commodities themselves this week and their equity market links – Copper and Russia (stocks) both down -0.5-1% again this morning and a lot of these things are close to 3 month lows with USD at 3 month highs.


European and Chinese halts worked (Greece is still halted) and the U.S. Equity ramp came right after S&P 500 (Index + Emini) net SHORT position (CFTC futures/options contracts) peaked at -162,467 at the July U.S. equity market low! Risk ranges are now as wide as they’ve been all year.


**The Macro Show - CLICK HERE to watch Hedgeye CEO Keith McCullough and Macro Analyst Christian Drake.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

General Mills remains on the Hedgeye Consumer Staples Best Ideas list as a LONG. GIS has a lot of things going for it and they are going to show it in the top and bottom line this year. Over the last couple of months, the company has announced the removal of artificial colors and flavors from their cereals. More recently, they have committed to using only cage-free eggs.  Many of these small actions that management is taking are going to have a snowball effect as they go throughout FY16. Below is a list of some of the biggest things that we are looking forward to this year:

  1. Yoplait in China
  2. Gluten-Free Cheerios
  3. No artificial colors or flavors in the cereal
  4. Granola innovation / Muesli
  5. Greek Plenti / Whips
  6. Original yogurt sugar reduction
  7. Renovation on Grain Snacks
  8. Strong push on Natural & Organic products
  9. Delivering Value to consumer on brands like Totino’s and Hamburger Helper
  10. Bringing U.S. innovation International

Gaming, Lodging and Leisure Sector Head Todd Jordan reiterates his team's bullish high-conviction thesis on Penn National Gaming. The company remains one of our favorite names on the long side and boasts the best new unit growth story in domestic gaming. Jordan further notes that with more states releasing their June gaming revenues this past week, we feel more confident in our higher than consensus Revenue, EBITDA, and EPS estimates.


Long-term Treasury rates remain the best proxy for forward-looking growth expectations. We outline three components of secular stagnation below to explain the SAVINGS/INVESTMENT GLUT that is at the heart of the academic argument for current policy measures:

  1. Negative demographic trends globally (decline in population growth and aging population)
  2. Reduced capital intensity in leading industries (think of the capital and labor required to start Facebook over U.S. Steel)
  3. Falling relative prices of capital goods       

Three for the Road


Greece keeping the stock market (and banks) closed until next wk - should be interesting when they open...



A great man is always willing to be little.

Ralph Waldo Emerson


Since peaking on June 12th the Shanghai and Shenzhen Composite indices have lost -26% and -33%, respectively. That equates to a combined loss of over $3.2 trillion.

Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.