PHS & Purchase Apps | Mehhh ...

Takeaway: Summer doldrums have set in with July PHS +0.5% M/M, but decelerating Y/Y for the third consecutive month. Aug MBA #s show more of the same.

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.


PHS & Purchase Apps | Mehhh ... - Compendium 082715


Today's Focus: July Pending Home Sales & MBA Mortgage Applications

Pending Home Sales rose +0.5% sequentially in July following last month’s notable -1.7% retreat off the post-crisis highs recorded in May.  On a year-over-year basis growth decelerated -100 bps sequentially to +7.4% YoY, marking a 3rd consecutive month of 2nd derivative slowing. 


The takeaways are pretty straightforward:

  • From Great to Good: In rate-of-change terms, growth in activity is slowing and that trend should continue as comps steepen considerably through the balance of the year  (see charts 2/3 below).  
  • EHS Downside: PHS is a strong leading indicator for EHS and the prevailing tendency has been for EHS to re-couple in favor of PHS following short-term dislocations.  PHS softness in June and today’s uninspiring print for July suggest downside risk to reported EHS over the next month or two (see 1st chart below).   
  • Purchase App Corroboration:  The recent trend in Purchase Applications has been similarly lackluster.  Inclusive of the +1.7% gain in the latest week, Purchase Demand is tracking -2.4% MoM in August and -1.6% QoQ for 3Q.     
  • New vs Existing:  New and Existing Sales face similar (i.e. tougher) comp dynamics over 2H15 but, given where each is in their respective cycle, the MT/LT opportunity for new construction activity remains more compelling.  The mean reversion opportunity to average levels of activity in the new home market is ~20% while it's modestly negative in the existing market.  Upside to 6.0MM or greater in EHS is reachable (from 5.59MM last) but would require full market normalization and full resurgence in 1st-time buyer share to average historical levels. 
  • Rates:  Rates remain the lead swing factor for the complex and while rampant rate volatility has characterized most of the YTD, the expedited rate retreat over the last month has supported the relative case for domestic housing leverage.  At 3.83% on the 30Y FRM, affordability remains +4.5% better than the 2014 average and sits as a modest tailwind for HPI.



PHS & Purchase Apps | Mehhh ... - PHS vs EHS


PHS & Purchase Apps | Mehhh ... - PHS YoY TTM


PHS & Purchase Apps | Mehhh ... - PHS Comps


PHS & Purchase Apps | Mehhh ... - PHS Regional YoY


PHS & Purchase Apps | Mehhh ... - PHS LT


PHS & Purchase Apps | Mehhh ... - Purchase Apps Monthly YTD


PHS & Purchase Apps | Mehhh ... - Purchase Index   YoY Qtrly


PHS & Purchase Apps | Mehhh ... - Purchase Apps 2013v14v15


PHS & Purchase Apps | Mehhh ... - 30Y FRM 




About Pending Home Sales:

The Pending Home Sales Index is a monthly data release from the National Association of Realtors (NAR) and is considered a leading indicator for housing activity in the US. It is a leading indicator for Existing Home Sales, not New Home Sales. A pending home sale reflects the signing of a contract, but not the closing of the transaction, which occurs 1-2 months later. The NAR uses data from the MLS and large brokers to calculate the Pending Home Sales index. An index value of 100 corresponds to the average level of activity during 2001.



The NAR Pending Home Sales index is released between the 25th and the 31st of each month and covers data from the prior month.


About MBA Mortgage Applications:

The Mortgage Bankers’ Association’s mortgage applications index covers more than 75% of mortgage applications originated through retail and consumer direct channels. It does not include loans delivered through wholesale broker and correspondent channels. The MBA mortgage purchase applications index is considered a leading indicator of single-family home sales and construction. Moreover, it is the only housing index that is released on a weekly basis. 



The MBA Purchase Apps index is released every Wednesday morning at 7 am EST.



Joshua Steiner, CFA


Christian B. Drake

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more