Build It and They Will Come . . .

Well, housing starts just had a rousing month, coming it at a 1.14 million annualized rate, a very nice 20% climb from March.  Yep, lots of homes being built.

http://www.bloomberg.com/news/articles/2015-05-19/housing-starts-in-u-s-surge-to-seven-year-high-permits-climb

Mind you, I said built, not sold.  And you can see why they are building.  The NAHB has high expectations for the future this year, though current consumer traffic seems to be a tad lacking at the moment. 

http://www.zerohedge.com/news/2015-05-18/homebuilder-sentiment-slides-misses-5th-last-6-months

We will see what happens when NAHB expectations run face forward into reality.  For reality is that folks these days simply aren't in the home buying mood.  Home ownership rates are over 5% off their peak and the lowest they have been in 25 years:

http://www.cnbc.com/id/102627205

Yet this is with record low mortgage rates, so what gives?  Could it be that baby boomers are retiring, empty nesters and/or switching to lower paying part time jobs (willingly or not) and are downsizing or choosing to rent?  Could it be that median incomes, adjusted for inflation, are down 10% since 2000 and housing prices, also adjusted for inflation, are up 20%?  Could it be that young people with no job security are choosing to not load up with so much debt, especially after seeing the bubble burst in 2008 with massive foreclosures and the like?  Could it be builders have given in to the heroin epidemic and simply have no idea what is going on?  You choose.  Either way, not likely to have a happy ending.

And yet the rosy numbers will undoubtedly boost 2nd Quarter GDP forecasts (not reality, just forecasts).  The Atlanta Fed just increased its 2nd quarter forecast from .6 to .7% annualized.  Notably the Atlanta Fed GDP Now forecast is still well below the blue chip consensus that is close to 3%, but these blue chip forecasts are as reliable as, well, NAHB forecasts.  And so, with optimistic economic numbers, comes a stock market pretty much stuck at even.  Torn between good housing numbers on one hand and a Fed looking for such rosy news to justify an increase in rates on the other.  Yes, good news is bad and bad news is good.  Welcome to the new economy.

May 21 Update

I posted the above a couple of days ago and now it all becomes clear to me.  You see, today the sales numbers for existing homes came in and they were - shockingly - below forecast.

http://globaleconomicanalysis.blogspot.com/2015/05/existing-home-sales-lower-than-any.html

So that explains it.  All these builders are optimistic and building new homes because people have  suddenly decided to start buying new houses instead of existing houses.  I apparently still have a lot to learn on this economics stuff cause I really did not see that coming.  How obvious that sales on new homes will undoubtedly be going up if sales on existing homes are going down.  Just saying it out loud makes me wonder how I did not see that before.  And now the other correlations are becoming clearer as well; incomes down, spending up; full time jobs down, employment up; house prices up, house demand down; bad news reported, stock prices up.  It all makes sense and I can see clearly now, the rain is gone.  I can see all obstacles in my way . . .