Builder confidence in the market for newly-built single-family homes fell four points to 56 in December on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) as concerns over housing affordability persist. Although this is the lowest HMI reading since May 2015, builder sentiment remains in positive territory. “We are hearing from builders that consumer demand exists, but that customers are hesitating to make a purchase because of rising home costs,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “However, recent declines in mortgage interest rates should help move the market forward in early 2019.” “The fact that builder confidence dropped significantly in areas of the country with high home prices shows how the growing housing affordability crisis is hurting the market,” said NAHB Chief Economist Robert Dietz. “This housing slowdown is an early indicator of economic softening, and it is important that builders manage supply-side costs to keep home prices competitive for buyers at different price points.” 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 the HMI indices posted declines. The index measuring current sales conditions fell six points to 61, the component gauging expectations in the next six months dropped four points to 61, and the metric charting buyer traffic edged down two points to 43. Looking at the three-month moving averages for regional HMI scores, the Midwest dropped two points to 55; the West and South both fell three points to 68 and 65, respectively; and the Northeast registered an eight-point drop to 50.
Google to spend $1B on new campus in New York
Alphabet’s Google plans to invest more than $1 billion on a new campus in New York. That would be the second major technology company, after Amazon, to pick America’s financial capital to expand and create thousands of jobs. The 1.7 million square-foot campus will be called Google Hudson Square, according to a company blog post on Monday. Google hopes to start moving into the building by 2022. It’s the latest tech giant to announce that it would be building new campuses. Apple announced last week it would spend $1 billion to build a new campus in Austin, Texas. Last month, Amazon.com said it would open offices in New York and the Washington, D.C. area, creating more than 25,000 jobs. Mountain View, California-based Google’s move to invest in prime real estate on the Lower West Side of Manhattan also underscores the growing importance of New York as a hub for innovation and an incubator for technology companies. New York is quickly becoming a hub for technology as the city provides a better option to other places that would require more investment. The Wall Street Journal reported last month that Google was nearing a deal to buy or lease an office building in New York City that could add space for more than 12,000 new workers.
HUD Deputy Secretary Pam Patenaude resigns
This morning the Deputy Secretary of the Department of Housing and Urban Development, Pam Patenaude announced to Secretary Ben Carson her plans to step down in the New Year. “It has been my honor to serve President Trump and Secretary Carson and I am deeply grateful to both for this opportunity,” her resignation letter states. “Thank you to my HUD family and fellow “housers” for helping Americans access decent, safe and affordable housing.” Patenaude’s future is unclear. The letter simply adds she is grateful for an extensive, 35-year career in housing and that she looks forward to returning with her husband, Chuck, to their home in New Hampshire. “I will continue to promote the President’s agenda to make this nation stronger and more prosperous for every American,” the letter reads. Prior to her role at HUD, Patenaude served as the president of the J. Ronald Terwilliger Foundation for Housing America’s Families. Patenaude is also the former director of housing policy at the Bipartisan Policy Center. She was also honored with a HousingWire 2013 Women of Influence award. Patenaude served as HUD assistant secretary for Community, Planning and Development during the George W. Bush administration. She brings more than 25 years of experience in housing, community economic development, real estate, and public policy.
Oil prices pressured by oversupply, global economic concerns
Oil prices steadied on Monday after slipping by around 2% last week, but remained under pressure from oversupply and concern over the prospects for global economic growth and fuel demand. Brent crude oil was down 10 cents a barrel at $60.18 per barrel by 0945 GMT. US light crude was down 5 cents at $51.15. Both benchmarks fell more than 25% through October and November as a supply glut inflated global inventories but have stabilized over the last three weeks, trading within fairly narrow ranges as oil producers have promised to cut production. Many investors doubt planned supply cuts by the Organization of the Petroleum Exporting Countries and other producers such as Russia will be enough to rebalance markets. OPEC and its allies have agreed to reduce output by 1.2 million barrels per day (bpd) from January, in a move to be reviewed at a meeting in April. But US shale output is growing steadily, taking market share from the big Middle East oil producers in OPEC and making it harder for them to balance their budgets. “The dust has settled on the decision by OPEC/non-OPEC to slash production,” said Stephen Brennock, an analyst at London brokerage PVM Oil. “Yet the producer alliance has so far little to show for it.” “Far from breathing new life into the energy complex, oil prices are below the pre-OPEC meeting level. The truth of the matter is that fresh OPEC+ cuts will not go far enough to overturn the incumbent supply surplus,” he added.
Potential government shutdown looms over 2019 economic forecast
A recent Wall Street Journal poll revealed that most economists think the trade dispute between the US and China poses the greatest downside risk to the economic outlook in 2019, but economists at Capital Economics disagree. “We think the biggest downside risk next year is the possibility of a lengthy federal shutdown that could eventually develop into another debt ceiling crisis,” Capital Economics wrote in its weekly report issued Friday. President Donald Trump and Democrats on the Hill can’t seem to strike a deal on federal spending, which means the government may shut down as soon as Friday if lawmakers can’t come to an agreement. According to Capital Economics, a government shutdown is the darkest black cloud looming over the economic forecast in 2019. The report notes that markets are currently “fairly sanguine” about the possibility, despite President Trump’s recent remark that he would be “proud to shut down the government” if his request for $5 billion to fund a border wall is shot down. But the economists warn that a shutdown could be lengthy, weighing down the first half of the year. “Previous shutdowns have had only a modest impact,” they wrote, “but this one could go on for months, particularly if a critical Mueller report convinces the Democrats to impeach.”