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Economy in Brief

Housing Starts Strong
by Tom Moeller January 21, 2004

Housing starts added another 1.7% in December, rising to the highest level since February 1984. Consensus forecasts had been for a moderate decline versus November which was revised down.

For the year, 2003 was the strongest for housing starts since 1978.

Single family starts fell a slight 0.6% last month following a downwardly revised gain in November. Single family starts in 2003 were a record 1,501 million, up 10.0% y/y.

Multi-family starts jumped 11.6% in December following a 12.8% gain the prior month. Multi-family starts last year were the highest since 1989.

Housing starts fell m/m in the Northeast (11.1% y/y) and in the Midwest (2.6% y/y). Starts were up m/m in the South (21.3% y/y) and in the West (16.0% y/y).

Building permits rose 3.3% m/m and were up 4.5% for 2003.

Housing Starts (000s, AR) Dec Nov Y/Y 2003 2002 2001
Total 2,088 2,054 15.0% 1,850 1,711 1,601
  Single-family 1,664 1,674 13.8% 1,501 1,364 1,272
  Multi-family 424 389 20.1% 349 347 330
Building Permits 1,924 1,863 0.9% 1,829 1,750 1,637
Housing Market Index Down Slightly in January
by Tom Moeller January 21, 2004

The National Association of Home Builders (NAHB) reported that their Composite Housing Market Index fell moderately in January to 68 (+6.3% y/y).

During the last fifteen years there has been a 79% correlation between the y/y change in the NAHB index and the change in single family housing starts.

The index of current market conditions for home sales fell 3.9% m/m to 74 (+7.2% y/y), the lowest level since September.

The index which measures expected home sales in six months also fell to the lowest level since July.

Traffic of prospective buyers fell moderately.

The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.

Visit the National Association of Home Builders using this link.

Nat'l Association of Home Builders Jan Dec Y/Y 2003 2002 2001
Composite Housing Market Index 68 70 64 64 61 56
Mortgage Applications Jumped Again
by Tom Moeller January 21, 2004

The index of mortgage applications compiled by the Mortgage Bankers Association surged 30.4% last week (-16.7% y/y) to the highest level in since early August.

The surge was driven by a 51.5% w/w spike in applications to refinance (-38.8% y/y).

Analysis titled "After the Refinancing Boom: Will Consumers Scale Back Their Spending?" from the Federal Reserve Bank of New York is available here.

The effective interest rate on a conventional 30-Year mortgage fell slightly to 5.82% from 5.84% the prior week and versus 5.97% averaged last year. The effective rate on a 15-year mortgage fell to 5.17%.

Purchase applications also were strong last week and rose 12.5% (+41.2% y/y).

During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing home sales.

The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site here.

MBA Mortgage Applications (3/16/90=100) 1/16/04 1/09/03 2003 2002 2001
Total Market Index 916.1 702.6 1,067.9 799.7 625.6
  Purchase 501.6 445.9 395.1 354.7 304.9
  Refinancing 3,327.3 2,195.7 4,981.8 3,388.0 2,491.0
Chain Store Sales Off For Third Week
by Tom Moeller January 21, 2004

Chain store sales fell 0.7% last week and were down for the third consecutive period according to the ICSC-UBS survey.

Because of a strong end to December, the level of sales so far in January are up 1.6% versus last month.

During the last five years there has been a 61% correlation between the year-to-year percent change in the ICSC-UBS measure of chain store sales and the change in non-auto retail sales less gasoline.

The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

ICSC-UBS (SA, 1977=100) 01/17/04 01/10/04 Y/Y 2003 2002 2001
Total Weekly Retail Chain Store Sales 426.4 429.2 3.9% 2.9% 3.6% 2.1%
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