Alan's Alert 7-26-2021

 

Someone is shining a laser at the housing market.  Recently the price of lumber had skyrocketed and now it has crashed back down.  This caused headaches for builders as many projects had to be re-bid or had escalation clauses inserted to cover lumber market volatility.  Now that the price is quickly plunging to pre-shutdown levels, home sales data has turned weak.  The mad scramble to buy a house is beginning to fade.  Last week I had touched on housing starts and building permits.  Not included in that data was that mortgage applications had declined 4%.  I felt this was a normal reaction after they had surged 16% in the previous week.  This morning the US Census Bureau released their New Home Sales report.  It came in at -6.6%.  This is in stark contrast to the consensus estimate of +3.5%.  

This is the third consecutive decline.  You can see from the chart; it has quickly reverted to the trend-line of the past ten years.  Also, the median sales price has decrease from $374,400 to $361,800.  More houses are starting to hit the market pushing inventories up to 6.3 months’ worth of supply.  This puts it in line with where it was prior to the government shutdowns. 

 

Home prices and sales are an important indicator.  Just like the stock market, the housing market is powerfully impacted by the Fed’s money pump.  These markets require ever increasing amounts of new money to continue to breakout to dizzying new heights.  Tomorrow we’ll get a look at the Fed’s money pump when they release their H.6 money supply data.

 

 

The banking picture continues to look rough.

Lending has run out of steam.  New business loans are not being created. 

 

On the consumer side:

Savings is up and credit card use is down.  When everyone was locked down by the government, did they go on a Dave Ramsey reading spree?  The “financial guru” emphasizes paying off debt and saving 3-6 months’ worth of expenses.  That looks exactly like what is going on here.  If this trend were to reverse, inflation would be roaring into the market.  Currently it is trickling in, here and there.

 

 

This is a big week for market moving events.  The Federal Reserve Open Market Committee (FOMC) meets for 2 days starting tomorrow.  A summary press conference will be given on Wednesday.  Tomorrow, the Fed also releases the money supply data and Friday, their favorite inflation indicator (Personal Consumption Expenditure) is posted.

Important and Potential Market Moving Events This Week

 

Tuesday, July 27
5.30am Durable Goods Orders (June)
6am S&P/Case-Shiller Home Prices (May)
6am House Price Index (May)
7am CB Consumer Confidence (July)
9am H.6 M2 Money Supply
 
Wednesday, July 28
5.30am Wholesale Inventories (June)
11am Fed Interest Rate Decision
11.30am Fed Press Conference
 
Thursday, July 29
5.30am Initial and Continuing Jobless Claims
5.30am GDP (2^nd Quarter)
7am Pending Home Sales (June)
 
Friday, July 30
5.30am Personal Saving Rate (July)
5.30am Personal Consumption Expenditures (July)