WHAT GIVES IN HOUSING...
The Michigan Consumer Sentiment reading was released this morning and we flagged down one data point. One of the sub-segments of the overall reading is the index titled "Good time to sell a house". As this reading moves higher, it insinuates survey participants are more eager to sell their home. We like to compare this to homebuilder confidence readings in order to get a gauge for eventual supply imbalances. When the Home Builder Market Index is above 50 it suggests builders are confident about the future. Today, this reading is up to 70, the highest mark since 2007, and well off the 2009 lows.
While both readings are lagging indicators and do not suggest immediate caution, one must think about the entire landscape of the economy and hypothesize implications. Yesterday the FED announced a rate hike, along with expectations for more throughout 2018. The bond market seemed to be ahead of the curve as short interest within rates were already at extreme levels and yields haven't moved much from a week ago. Should rates move higher, this would be a negative impact on both readings.
Overall, while there are many other factors to involve, homeowners looking to sell alongside overconfident builders is typically reminiscent of tops, not bottoms.
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Sean D. Emory
Avory & Co. Founder & Chief Investment Officer
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