Housing Numbers Are Strong

Wednesday’s three news offerings were surprisingly strong. The durable goods orders were up 6.1% blowing out forecasts of 1.6% going into the number. We realize this number can be quite volatile but that is a strong number on the surface. The March New home sales also surprised to the upside, up 13.8% versus expectations of 3.2%. Looking at the reports on the Fed’s Beige Book, we see that the Fed reported good economic growth in the last several weeks.

In fact, with all of the numbers out this past few weeks, one would probably have to agree with the GDP estimates coming out on Friday looking for 5% growth. We are still in a state of disbelief this evening as we consider the data points presented. As far as housing goes, we find such an outsized gain going against the facts but we are rather focused on the local market, here in Minneapolis.

Looking at the WSJ, Wednesday’s edition had an article on page D1 describing how “Housing Strength Shifts to New Markets”. This article shows that Minneapolis has increased inventory by 43%, while other markets are showing much bigger increases in inventory. There are places that have smaller or negative increases in inventories but the point is that the market is bringing out a lot of Sellers, we’re not so sure about the buyers. It is possible that some of these home sales are occurring at lower prices due to new sellers entering the market with a need to sell. If a home is priced right, or low, in this type of market, it may well sell.

The Dow did make a new high for the move even though the broader indexes we follow did not, including the Russell 2000. The market is showing some signs of getting over bought but the momentum indicators are weak, at best...

Be careful out there…

Dow Industrials: 11,354.49 +71.24
RYVNX: 18.39
RYAIX: 21.91
TLT: 83.99
BEGBX: 13.15