Wednesday, September 18th, 2024

Pre-market futures are up this Hump Day, the very day market participants expect the first Fed funds rate cut since March of 2020. Over the past five trading days, markets have drifted higher on muted optimism that we may see a 50 basis point (bps) rate cut instead of the 25 bps the market had priced-in earlier. 

But a cut is a cut, and even at 25 bps, it will come as welcome news. The Fed has not moved either direction on interest rates since July of last year, when it took Fed funds to a multi-year high range of 5.25%-5.50%. Currently, the Dow is +55 points, the S&P 500 is +9 and the Nasdaq +56 points. Only the small-cap Russell 2000 is lower, -2 points at this hour.
 

Housing Starts Blow Past Estimates

August Housing Starts posted their biggest jump in nine months this morning, reporting 1.356 million seasonally adjusted, annualized units — ahead of the 1.31 million expected, for a +9.6% increase. This rebound was off an unrevised 1.24 million units the previous month, which was the lowest print of the post-Covid era.

The strength in new starts came from Single Family housing, which is also the segment of biggest demand. The +15.8% in single-family starts amounted to +992K for the month, more than offsetting the -6.7% in Multi-Family housing starts last month, +333K.

Starts performed strongest in the Midwest, +29.6%, followed by +15.5%v in the South. The West was also positive, at +5.9%, but the Northeast pulled back in a big way -27.3% for August. 
 

Building Permits Also Surge Past Expectations

Building Permits, also for August, reached their highest level in five months to 1.475 million, well ahead of the 1.41 million analysts were looking for. (The 1.41 million seasonally adjusted, annualized units matched the upwardly revised headline for July permits.

Here it was Multi-Family leading the way, +8.4%, with Single-Family permits (a proxy for future housing starts) +2.8% last month. The Midwest also led the way here, +12.5%, followed by the South and the Northeast at +6% and +3.5%, respectively. Only the West posted a negative read for August, -1.6%.

Like most other things directly impacted by interest rates, we expect the housing market to pick up from its doldrums once the loosening cycle for the Fed commences, starting later today. The Starts/Permits data is generally in-line with what we saw from Homebuilder Confidence report released yesterday.

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