Housing starts came in at the low-end of the range for April, perhaps suggesting that what some have been keen to describe as a “bubble” is poised to float at a lower altitude going forward.
The 1.569 million annual rate for last month missed the 1.704 consensus and very nearly matched the most pessimistic estimate from five-dozen economists. The range was 1523k to 1850k. Some suggested soaring lumber prices are prompting buyers to hold off on construction.
April’s 9.5% drop came on the heels of a 19.8% gain in March (figure below).
The YoY print (+67%) is meaningless. Any comps with March and April of 2020 in the US have virtually no informational value, for obvious reasons.
Permits missed slightly too. Some Fed officials have voiced concern around housing, and a veritable cacophony of Fed critics take every opportunity to blame policymakers for fostering a new bubble.
The Fed played a role, but let’s be clear: Pandemic dynamics, including a flight to the suburbs and the proliferation of work-from-home arrangements created insatiable demand, which only grew as it became apparent that remote work might be here to stay for some occupations. The Fed’s crisis response was fuel on the fire, as mortgage rates hit record low after record low. This is a familiar narrative.
Mortgage rates have fallen in four of the last five weeks after rising swiftly in Q1, during the bond selloff (figure above).
Meanwhile, Home Depot logged another blockbuster quarter. Same-store sales rose 31%, a massive beat for comps. Consensus was looking for “just” a 20% gain. In the US, comps were up 29.9%.
Net sales beat the high-end of the range.
“2021 is off to a strong start as we continue to build on the momentum from our strategic investments and effectively manage the unprecedented demand for home improvement projects,” CEO Craig Menear gushed. “I’m proud of the resilience and strength our associates have continued to demonstrate, and I would like to thank them and our supplier partners for their hard work and dedication to our customers.”
“Given the heady performance of last quarter it would have been tempting to say that Home Depot had reached its peak,” GlobalData’s Neil Saunders said. Q1 results suggest the company is “still climbing and has reached new heights.”
Still, Saunders reckoned last quarter was the “zenith” for Home Depot. One wonders if the same is true for the US housing market.