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Housing Stalls Despite Solid Economic Growth

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Tuesday, 20 November 2018 10:37 AM Current | Bio | Archive

INDICATOR: October Housing Starts and Permits and November Philadelphia Fed NonManufacturing Survey

KEY DATA: Starts: +1.5%; 1-Family: -1.8%; Permits: -0.6%; 1-Family: -0.6%/ Phila. Fed (NonManufacturing): +5.6 points; Orders: +20.4 points

IN A NUTSHELL: “The housing market is largely going nowhere despite continued solid economic growth.”

WHAT IT MEANS: Housing is the focus of attention as it is a bellwether, interest-sensitive sector. It has been faltering, but home construction improved a touch in October. That came despite a sharp drop in the National Association of Homebuilders index. Confidence may be faltering, even as construction continues at current levels. The rise in activity was driven by a solid increase in multi-family construction. Since that component tends to be quite volatile, we need to be cautious in saying that builders are out there putting lots of shovels in the ground. But there should be further gains, even if they are modest, in the months ahead. Housing permits, though off a touch, are still running above starts. Developers don’t pay for permits unless they are pretty confident they will actually be turning them into real buildings. There is a growing backlog of permits that should come into use soon and with so much destruction due to weather and fire, look for home building to pick up even if interest rates rise. So far this year, home construction is up nearly four percent, which is just fine.

Manufacturing looks like it is wandering around almost as much as housing, but the services and construction portion of the economy is in good shape. The Philadelphia Fed’s nonmanufacturing index jumped in early November, fueled by a huge surge in new orders. Hiring remained strong and wage gains are increasing in large number of companies. There are also growing inflation pressures, as both the prices paid and prices received indices remain high.

MARKETS AND FED POLICY IMPLICATIONS: For most workers, there is a lot to be thankful this Thanksgiving season. Job security is high and though wage gains are not what many would like to see, they are improving. Business and consumer confidence are near or at record levels, reinforcing the belief that while growth may be slowing, it is still solid

Joel L. Naroff is the president and founder of Naroff Economic Advisors, a strategic economic consulting firm.

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The housing market is largely going nowhere despite continued solid economic growth.
housing, economic, growth, market
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2018-37-20
Tuesday, 20 November 2018 10:37 AM
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