In this photo taken July 15, 2011, carpenters work to enclose a roof on a home being built in Sprinfield, Ill.
You might expect the U.S. housing sector to be a fickle place for investors right now, given that the S&P homebuilding index has risen more than 80 per cent since the start of October, bringing it to its highest level in about 18 months. But after a bout of upbeat reports on housing, suggesting early improvements, Thursday brought a big disappointment: New housing starts fell 4.1 per cent in December. The market's reaction? Yawns all round.
The three-member S&P 500 homebuilding index was down all of 0.1 per cent in midday trading on Thursday, recovering from a steeper slide earlier in the day, which is hardly a shocking reaction. The pause comes after overall starts were 657,000 in December, disappointing expectations for 680,000 starts. The details weren't bad though, as a number of observers pointed out.
Ian Shepherdson, High Frequency Economics: "The dip in starts is only mildly disappointing; after the big gains of recent months a small decline in December is not a problem. ... In any event, the key number in this report, single- family permits, rose for the third straight month, reaching the highest level since April 10, when activity was supported by the homebuyer tax credit. That's long gone, and the market now is being boosted by sustainable factors like the drop in mortgage rates and the easing of mortgage lending conditions."
Of course, any improvements in the housing sector come from a very low base – which is why investors have been jumping at early signs of improvement. As Calculated Risk makes clear on a chart, housing starts have been essentially drifting at low levels for about two-and-a-half years following the collapse of the housing market. Consider that since 1968, monthly units have usually topped 1 million and generally peaked well above 2 million.
David Berman