Housing Recovery on Track

“Davidson” submits:

Single-family housing starts in March were at a rate of 764,000; this is 9.2 percent (±10.3%)* below the revised February figure of

841,000.” https://www.census.gov/construction/nrc/pdf/newresconst.pdf

Charlie Munger: Invert And Use “Disconfirming Evidence”

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“U.S. housing starts fell more than expected in March and permits for future home construction hit a one-year low, suggesting some cooling in the housing market in line with signs of a sharp slowdown in economic growth in the first quarter.”

http://www.cnbc.com/2016/04/19/us-housing-starts-march-2016.html

 

The headlines were dour with this morning’s report on housing starts. No one could tell from what was said that housing remains on track and is not the disaster they say. Feb 2016 report of 822,000 was revised higher to 841,000. The data trend has a choppy pattern as one can see in the chart. The trend continues in a positive direction as does the HMI and other housing indicators.

Screen Shot 2016-04-19 at 8.20.31 PM

Investors are spooked be every short term misinterpretation in the media. To truly understand economic activity one must step back and check the 6mo trend. While slower than previous recoveries due to heavy handed regulation of banks and Fed manipulation of mtg rates to levels which create a tight credit environment, housing is still trending higher and at the current pact may still have several years ahead if the Fed does not shut lending down with short term rate hikes. Short term rate hikes on a very tight T-Bill to 10yr Treasury spreads of 1.5% only reduces mtg lending with is currently 1/3 what can be considered a normal recovery level.

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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”.