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Weather Made for Rapidly Cooling Builder Sentiment; Bonds Don't Really Care
Posted to: Micro News
Tuesday, February 18, 2014 10:31 AM

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Here's the run-down for the NAHB Housing Market Index:

  • Index at 46 vs 56 previously, lowest since May
  • Single-Fam Sales 51 vs 62
  • Prospective Buyers 31 vs 40, lowest since April
  • 6-mo outlook 54 vs 60
  • NAHB cites weather conditions as contributing to a decline in traffic
  • Full Release

Some thoughts...  First of all, this is statistically significant move for the index--the biggest downward movement in the history of the survey.  Here's a shorter and longer term look:

[Image or graph removed from email. View full article with images]

Given the record move, we can see just how little attention bond markets are paying to this data as it's barely moved the needle.  10yr yields were at 2.721 when the data hit and only rallied about 1bp.  They've already given most of that back.

While the NAHB Index carries some mystique as a potential early indicator of broad-scale shifts in the housing market (it led the major move down in 2006-2008), it had been relatively much less useful in 2013.  If market participants are going to believe in that mystique again, it might require another instance of the report to corroborate--preferably one where weather can't be used as an excuse.

The extent to which weather may have actually played a role--at least as far as this data is concerned--can be seen in the "54 vs 60 previously" reading on the 6-month outlook.  In other words, even in the coming months where weather will undoubtedly be less forbidding, the numbers are still pretty rotten.




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