The Independent Market Observer

Monday Update: Housing Data Shows Signs of Slowing

Posted by Brad McMillan, CFA®, CFP®

Find me on:

This entry was posted on Jun 25, 2018 1:16:49 PM

and tagged In the News

Leave a comment

Monday updateLast week's economic reports were all about housing, and we’ll get some insight on the consumer in the week ahead.

Last week’s news

On Monday, the National Association of Home Builders released its industry survey for June, which dropped from 70 last month to 68. Given the lack of lots and labor, as well as a surge in lumber prices, this pullback is reasonable. Although the index remains at a healthy level, this is the fifth decline in the past six months, and the index is now at a nine-month low. Given the shortage of supply for homes, demand remains strong. This should continue to support industry confidence but will bear watching.

On Tuesday, the housing starts report revealed some good news. Starts rose from 1.29 million in April to 1.35 million for May—the highest level in 11 years and beating expectations for an increase to 1.31 million. Single-family starts rose by only 3.9 percent, however, and the positive surprise was due to an 11.3-percent increase in multifamily starts. This has been a volatile series; therefore, the great headline number might not be as solid as it looks. Further supporting that worry, building permits declined by 4.6 percent for the month. This result is down to the lowest level since early 2017 and was much worse than expected. While the trend remains higher for both sales and permits, the drop in permits suggests some caution going forward.

The existing home sales report, released on Wednesday, showed further signs of caution. Sales dropped from an upwardly revised 5.46 million in April to 5.43 million, below expectations of an increase to 5.52 million. Low inventories remain a problem, and rising mortgage rates also appear to be crimping demand.

Overall, last week’s data suggests that the housing market may be slowing. While conditions remain healthy at the moment, the trends may be changing—and this is worth watching going forward.

What to look forward to

Housing kicks off the week with the new home sales report, which came in better than expected on Monday morning. The annualized monthly sales were up to 689,000 in May from 662,000 in April, substantially beating the expected 667,000 figure. This increased activity suggests housing demand remains healthy.

On Tuesday, the Conference Board will release its consumer confidence survey. It is expected to pull back slightly, from 128 to 127.5, which would still be a very high level. Should the number come in as anticipated, it would indicate that consumer demand is likely to keep growing.

On Wednesday, the durable goods orders report should give the same indicator for business investment. The headline index, which includes transportation and is heavily influenced by aircraft orders, is expected to improve slightly from a very weak decline of 1.6 percent in April to a still weak decline of 1 percent for May, largely on trends in aircraft orders. This volatility is normal for this data series. The core index, which excludes transportation, is expected to do much better, pulling back from monthly growth of 0.9 percent in April to 0.5 percent in May. This result would still be healthy and a good indicator of future growth.

On Friday, the personal income and spending report will give further insight into the consumer. Personal income growth is expected to rise from 0.3 percent in April to 0.4 percent in May. Personal spending growth, on the other hand, is expected to drop back from 0.6 percent in April to a still healthy 0.4 percent in May. We already know that retail spending growth was strong in May, but weaker auto sales may pull the overall figure back a bit. The match in income and spending growth is a good sign for the sustainability of this level of growth.

Have a great week!

Subscribe via Email

New call-to-action
Crash-Test Investing

Hot Topics

New Call-to-action



see all



The information on this website is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings.

Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption by Commonwealth of any kind. You should consult with a financial advisor regarding your specific situation.


Please review our Terms of Use

Commonwealth Financial Network®