Recent weakness in the economic data — like retail sales, industrial production, and employment — are forcing investors to reassess their views on the U.S. economic recovery.
One sector where data points have been particularly negative is the housing market.
Earlier today, weekly data released by the Mortgage Bankers Association revealed a 4.1% drop in mortgage applications in the week ended February 14, following a string of declines over the past several months.
The release of monthly housing starts and building permits data revealed a 16.0% and 5.4% drop, respectively, in January — both much worse than expected.
At this point, however, this trend is nothing new — the housing recovery that was supposed to provide a powerful tailwind to the U.S. economy has been slowing for over a year now as prospective borrowers face higher interest rates.
“Housing was an area of weakness even before the recent stretch [of bad data], with the Fed having made note of the slowing of the housing recovery following last year’s sell-off,” write Credit Suisse interest rate strategists in a note to clients.
“An index of the monthly changes in various housing-related indicators shows that the sector rolled over in the first half of 2013 and the slide has been more or less unimpeded. Though the beginning of year rally might be typically expected to be supportive of housing activity, with the bad weather there is no reason to expect the trend to turn at this juncture. Even if the inflation data comes in supportive of higher yields, we expect the other economic indicators will keep the near-term bias range-bound, with risks of modest rallies.”
The chart above does not include today’s data.
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