Housing Starts Reaction Indicative of Negative Mood

Housing Starts Reaction Indicative of Negative Mood

When we woke up this morning we were under the impression that November housing starts were at a 1.1M seasonally adjusted annual rate. The number for December then came in at 1.1M….essentially flat.

Now, we then got word that November was being revised up massively to a 1.8M annual pace and somehow we then made the jump that today’s number was bad because starts “fell”? We added a 700k home start annual pace to the aggregate number in November and December and this is bad? We should not that the 1.8M number is the highest November number since before the Great Recession.

Think of it the other way. If November was revised DOWN to 800k and December came in at today’s 1.1M would we be cheering this as good news because starts “rose”? Sadly I think yes, OR, it again would be bad news because of the downward revision. The point here is people are finding bad news out there where there isn’t any.

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U.S. housing starts and permits fell in December after hefty gains the prior month, adding to a raft of weak data that have raised concerns over the health of the economy.

Groundbreaking dropped 2.5 percent to a seasonally adjusted annual pace of 1.15 million units, the Commerce Department said on Wednesday. November’s starts were revised to a 1.8 million-unit rate from the previously reported 1.17 million-unit pace.

December was the ninth straight month that starts were above 1 million units, the longest run since 2007. Housing starts averaged 1.11 million units in 2015, the highest since 2007 and up from 1.00 million units in 2014.

Building permits fell 3.9 percent a 1.23 million-unit rate last month. The drop followed two months of hefty gains.

The WSJ actually has a great informational page here where you can see the numbers and not that 2015 was way ahead of 2014 and November and December blew away 2014. In other words, housing maintains its positive momentum heading into 2016.

Here is “Davidson’s” chart:

Screen Shot 2016-01-20 at 4.44.55 PM

The trajectory of the US housing market is clear.

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Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a RealMoney.com contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.

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