Weekly Market Update
New home construction eased in September, but home builders are feeling more positive about the future. Here are these headlines and more:
Home Builder Confidence Rises for Second Straight Month
New Construction Slowed in September
Retail Sales Beat Estimates
Jobless Claims Suggest Weakness in Labor Sector
Home Builder Confidence Rises for Second Straight Month
Easing inflation and the anticipation of falling mortgage rates have led to an improvement in home builder sentiment, per the National Association of Home Builders (NAHB), who reported that their Housing Market Index increased two points to 43 in October.
What’s the bottom line? While home builder confidence remains below 50 in contraction territory, it has risen for two straight months after declining throughout the spring and summer. October also brought improvement in all three index components (buyer traffic, current and future sales expectations). Builders are clearly feeling better about the housing market over the next six months, as future sales expectations jumped 4 points and further into expansion territory above 50.
NAHB Chair, Carl Harris, confirmed that “builders are feeling more optimistic about 2025 market conditions.”
New Construction Slowed in September
Housing Starts eased from August to September, as the small increase in single-family home building was outweighed by a decline in multi-family projects. We saw a similar pattern in Building Permits, which are the forward-looking indicator for new home inventory. Single-family completions also declined for the month, which will not help on the inventory front.
What’s the bottom line? While builders are feeling more confident about the future, new home construction is still not keeping up with demand. This limited new supply relative to household growth should continue to support home prices.
Retail Sales Beat Estimates
Retail Sales rose 0.4% in September, above the 0.3% gain the market was expecting. The Core reading, which gets plugged into GDP, rose a much stronger than expected 0.7%, which may lead to stronger GDP estimates down the line.
What’s the bottom line? Overall, the sales figures for September show that consumer spending remains resilient, and strong spending is expected to continue this holiday season. The National Retail Federation (the world’s largest retail trade association) has projected that holiday sales are expected to increase between 2.5% and 3.5% compared to last year.
Jobless Claims Suggest Weakness in Labor Sector
Initial Jobless Claims fell 19,000 in the latest week, with 241,000 people filing for unemployment benefits for the first time. Continuing Claims rose by 9,000, as 1.867 million people are still receiving benefits after filing their initial claim.
What’s the bottom line? Initial Jobless Claims have been volatile in recent weeks, as the hurricanes have caused a spike in filings to the highest levels since July. Though it’s important to note that we’ve seen an uptick in claims among non-hurricane impacted states as well, which points to some weakness in the labor sector.
Meanwhile, Continuing Claims also rose to their highest level since July and are near highs from November 2021. This data continues to suggest that employers have slowed down their pace of hiring, and people are collecting benefits for longer periods of time.
What to Look for This Week
Look for an update on September’s Existing and New Home Sales on Wednesday and Thursday, respectively. Thursday also brings the latest Jobless Claims report.
Technical Picture
Mortgage Bonds ended last week just above support at the 100-day Moving Average, which has been holding. If Bonds are able to improve this week, there is a lot of room to the upside before reaching resistance at the 50-day Moving Average. The 10-year ended last week in the middle of a range between resistance at 4.126% and support at the 100-day Moving Average.
