Growing affordability concerns resulted in builder confidence in the market for newly-built single-family homes falling eight points to 60 in November on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Despite the sharp drop, builder sentiment still remains in positive territory. “Builders report that they continue to see signs of consumer demand for new homes but that customers are taking a pause due to concerns over rising interest rates and home prices,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “For the past several years, shortages of labor and lots along with rising regulatory costs have led to a slow recovery in single-family construction,” said NAHB Chief Economist Robert Dietz. “While home price growth accommodated increasing construction costs during this period, rising mortgage interest rates in recent months coupled with the cumulative run-up in pricing has caused housing demand to stall.” With the prospect of future interest rate hikes in store, Dietz said that builders have adopted a more cautious approach to market conditions and urged policymakers to take note. “Recent policy statements on economic conditions have lacked commentary on housing, even as housing affordability has hit a 10-year low,” said Dietz. “Given that housing leads the economy, policymakers need to focus more on residential market conditions.” Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. All of the major HMI indices posted declines. The index measuring current sales conditions fell seven points to 67, the component gauging expectations in the next six months dropped 10 points to 65 and the metric charting buyer traffic registered an eight-point drop to 45. Looking at the three-month moving averages for regional HMI scores, the Northeast rose two points to 58. The Midwest edged one point lower to 57, the South declined two points to 68 and the West dropped three points to 71.
General Electric taps John Rice, 2 others to lead power unit
General Electric on Monday formally named three executives, including longtime company official John Rice, to spearhead a turnaround effort for its struggling power business. Rice, the company’s former vice chairman who retired in 2017, will return as chairman of GE Gas Power to guide the division’s overall strategy. Longtime executive Scott Strazik will serve as CEO of GE Gas Power, replacing Russell Stokes, who will take over as CEO of GE Power Portfolio – a new business that includes the company’s steam, grid solutions, nuclear and power conversion efforts. “One of my top priorities is positioning our businesses to win, starting with GE Power,” GE Chairman and CEO Lawrence Culp said in a statement. “The leaders we are announcing today are exceptionally well suited to lead our new Gas Power and Power Portfolio teams in their efforts to deliver better customer outcomes and improve their execution and cost structures. I am confident this is the right strategy and the right team to lead these businesses forward.” The three executives will report to Culp. GE shares up more than 2% in midday trading. Culp, who took over as CEO last September, restructured GE Power as part of overall cost-cutting measures. The company has struggled to adapt in recent years to systemic changes to the US economy.
Senate set to vote on Trump’s CFPB nominee
For the last year, Mick Mulvaney has run the CFPB, taking over for Richard Cordray, who left the bureau the day after Thanksgiving last year. But Mulvaney’s appointment has been on an “interim” basis, which was extended when the Trump administration officially nominated Kathleen Kraninger to lead the bureau for the next five years. Kraninger was officially nominated in June, and passed out of the Senate Banking Committee back in August, but her nomination has not come to a full vote in the Senate yet. That’s about to change. Late last week, Senate Majority Leader Mitch McConnell, R-Kentucky, moved to bring Kraninger’s nomination to the Senate floor for a full vote. According to multiple reports, the vote is likely to be scheduled for the week after Thanksgiving. And with Kraninger likely to be confirmed by a majority Republican Senate, Mulvaney’s time at the CFPB will likely soon come to a close. Kraninger has the support of the housing industry. Last week, the housing industry’s largest and most prominent trade groups joined together to call on the Senate to bring Kraninger’s nomination to a vote. “The undersigned organizations, representing the many facets of the housing and financial industries, support the nomination of Kathleen Kraninger as the Director of the Bureau of Consumer Financial Protection,” the groups said in a letter to the Senate leadership and members of the Senate Committee on Banking, Housing, and Urban Affairs. “Our organizations believe Ms. Kraninger has the ability to lead and manage a large government agency, like the Bureau, which is tasked to ensure consumers’ financial interests are protected,” the groups continue. “We believe she will also fulfill the equally important role of ensuring businesses have the necessary compliance support to further those interests.” The letter is signed by 21 of the housing industry’s top groups, including the National Association of Realtors, the Mortgage Bankers Association, the National Association of Home Builders, and the National Multifamily Housing Council. Those groups wanted a vote from the Senate, and now it looks like they’re going to get one.
Treasury yields slip amid weak housing data, global trade worries
Treasury yields fell on Monday after the release of weaker-than-forecast housing data while concerns over global trade plagued investors. The benchmark 10-year note yield slipped to 3.061% while the short-term two-year yield dipped to 2.787%. Bond yields move inversely to prices. Homebuilder sentiment dropped to its lowest level since August 2016 this month amid rising mortgage rates and unrelenting price growth. “Builder sentiment is now joining the reality that housing has been slowing all year after hanging in pretty well this year,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group, in a note. “As the most interest rate sensitive area of the economy outside of auto’s, a moderation in housing was to be expected but what we’re seeing is just how sensitive the economy is to modest changes in interest rates that are historically low,” he said. The rise in bond prices also comes as US stocks sold off, adding to their steep losses from last week.
Black Knight to invest in Dun & Bradstreet
– Black Knight is joining renowned investor group led by CC Capital, Cannae Holdings and Thomas H. Lee Partners, L.P.
– Investment of up to $375 million to result in Black Knight economic ownership interest of less than 20% in re-capitalized company
– Upon the acquisition closing, Black Knight CEO Anthony Jabbour has agreed to serve as CEO of Dun & Bradstreet, while continuing in his current role at Black Knight
Black Knight, Inc. announced that its Board of Directors has approved a $375 million investment in Dun & Bradstreet, a global leader in commercial data, analytics and insights for businesses. Black Knight will join an investment consortium led by CC Capital, Cannae Holdings and Thomas H. Lee Partners, L.P. which has announced plans to acquire Dun & Bradstreet. The Black Knight investment will represent an economic ownership interest of less than 20% in the re-capitalized Dun & Bradstreet. As previously announced, the acquisition is expected to close no later than the first quarter of 2019. Following the completion of the acquisition, Anthony Jabbour, Black Knight’s Chief Executive Officer, has agreed to serve as Chief Executive Officer of Dun & Bradstreet while continuing in his current role at Black Knight. Additionally, William P. Foley II, Executive Chairman of Black Knight, will serve as Executive Chairman of Dun & Bradstreet’s Board of Directors. “Dun & Bradstreet is a well-established market leader that will benefit greatly from this investment group’s proven track record of harnessing companies’ potential and generating long-term growth,” said Foley. “I am confident that with Anthony’s leadership, expertise and experience as well as the dedication of Dun & Bradstreet’s talented employees, the company’s best days are ahead.” “With an impressive 177-year legacy and the support of a phenomenal group of investors, Dun & Bradstreet is entering an important next chapter in its evolution as a company,” said Jabbour. “I am excited by the opportunities in leading Dun & Bradstreet and look forward to working closely with management, Bill and the rest of the consortium and continuing the Company’s long history of excellence in helping customers and partners around the world.” Chinh Chu, Senior Managing Director and Founder of CC Capital, stated, “We are pleased that Black Knight will invest alongside us in Dun & Bradstreet and that both Anthony and Bill will take on these new roles upon closing. We are confident that they are the right leaders to help unlock the significant potential within this venerable company.” “We look forward to working with Anthony and the team as we reinvigorate growth at Dun & Bradstreet and create increased value for all stakeholders,” added Thomas Hagerty, a Managing Director at Thomas H. Lee Partners, L.P. “We share in the excitement about what’s ahead for the company and believe today’s announcement is a testament to the strength of that future.” Upon the completion of the transaction, Dun & Bradstreet will become a privately held company, and shares of Dun & Bradstreet common stock will no longer trade on the New York Stock Exchange.