Housing Numbers Disappoint: We’re Back to Bad News Being Good News for Stocks

Like it or not, Wall Street truly doesn’t give a shit about Main Street. When I was managing money, often times I resented the demands out of Main Street, as I was disconnected from the real world — only focused on my next trade.

This narrative plays out on a daily basis in the markets — as investors clamor for Fed policies which do little for the average Joe and much for the extraordinary Joseph. This morning housing numbers came in worse than expected. Futures are rising on this news and commodities are catching a bid. The play here is to hope the economy weakens enough to prevent a Fed hike in December.

Residential starts declined 9 percent to a 1.05 million annualized rate, the lowest since March 2015, a Commerce Department report showed Wednesday in Washington. The median forecast of economists surveyed by Bloomberg called for a rise to 1.18 million. Permits, a proxy for future construction, jumped 6.3 percent to the fastest pace since November.

“New-home construction seems to be in a holding pattern,” Jacob Oubina, senior U.S. economist at RBC Capital Markets LLC in New York, said before the report. “But I don’t think the housing recovery per se is stalling out.”

Work on multi-family homes, such as townhouses and apartment buildings, slid 38 percent to an annual rate of 264,000. Data on these projects, which have led housing starts in recent years, can be volatile. Starts on structures with at least five units were the lowest since June 2013.

Estimates for total housing starts in the Bloomberg survey of economists ranged from 1.1 million to 1.2 million. The previous month was revised to 1.15 million from a 1.14 million pace.

Permits increased to a 1.23 million annualized rate. They were projected to rise to a 1.17 million pace after 1.15 million the prior month, according to the survey.

Single-family house construction rose 8.1 percent to a 783,000 rate, the most since February, from 724,000 the previous month.

Three of four regions posted a decline, led by the Northeast with a 36 percent drop, the report showed. Starts in the West were unchanged.

The velocity of money continues to decline, thanks to Fed policy and a litany of regulations — such as Dodd Frank. We find ourselves in a weird world where growth plods along at 2%, yet so many economists keep publishing reports of an imminent breakout to the upside. It never happens and the risk keeps leaning to the downside, with a very sluggish consumer.

If you’re stock picking, good luck. From a macro perspective, there’s little to like about the growth of this economy and large macro trends for stocks.