FYI:
In last week’s B.I.G. Tips report on Retail Sales for the month of November, we noted that the internals of the report were “suggesting strength in the housing sector.” That idea was confirmed in the just-released December Homebuilder sentiment survey from the NAHB. While economists were expecting homebuilder sentiment to increase slightly from 69 to 70, the actual increase was much higher to 74. To put that reading in perspective, going all the way back to the report’s inception in 1985, there have only been six other months where the index was higher, and they were all back in 1998 and 1999. In other words, homebuilders are currently more optimistic than they were at any point during the housing bubble that peaked in 2005.
Looking at the internals of this month’s report, practically every metric was strong. Present and Future sales, as well as Traffic all saw healthy gains, with both Present Sales and Traffic surpassing their highs from the bubble. In terms of regional sentiment, we also saw healthy gains in every region except the Northeast where sentiment dropped by a rather large eight points. This leads one to ask if this is the first example of side effects of the GOP tax plan showing up in economic data. Given the generally high real estate taxes in this part of the country, it is expected to be among the most negatively impacted by the plan working through Congress.
The chart below shows the regional breakdown in sentiment over time. Here, it is interesting to note that the only region of the country where sentiment is higher than its peak at the bubble is the Midwest. The South (75 vs 77) and Midwest (85 vs 91) are relatively close, but not quite there, while sentiment in the Northeast remains well off its prior highs (53 vs 74). As a final note with regards to the large drop in sentiment for the Northeast, we would note that November’s reading did see a big spike, so December’s decline may have just been a little bit of giveback. Even still, the implications of the tax bill certainly aren’t going to have a positive impact on sentiment in the Northeast in our view.
Regards,
Ted
https://www.bespokepremium.com/think-big-blog/homebuilder-sentiment-goes-beyond-the-bubble/
