A lot of housing data hit the wires today, much of it unexpected and confusing, so let's start at the top.
Housing starts dropped an unexpected 10.6 percent, with multifamily leading the fall (down 34.6 percent) but single family still hurting (down 6.8 percent).
The street was looking for a gain of about 1.7 percent, but I'm not exactly sure why.
The October report was all about the home buyer tax credit.
Uncertainty over whether or not it would pass weighed heavily on home builder sentiment in the month, not to mention the fact that builders pushed new starts over the summer in order to get buyers in just in case the credit expired Nov. 30th. The extension and expansion passed the first week in November, so the effects of that won't be seen until next month. No surprise then that there would be something of a housing "hangover" as J.P. Morgan's Mike Rehaut called it in October starts and permits.
But more interesting to me today is the weekly mortgage applications report from the Mortgage Bankers Association. Given that said tax credit passed the week before last, and mortgage rates are sitting around 4.83 percent on the thirty-year fixed, you would think the numbers might have gone up, not down. Purchase apps fell 4.7 percent and refis fell 1.4 percent. Refis had been on fire, representing about 70 percent of all applications the week before. The question is, was most of the demand pulled forward, with many borrowers worried the tax credit would expire November 30th?
Builders and Realtors expect to see a bump in home buying on the back of the extended and now expanded tax credit, but I'm still not so sure. The credit benefits the low end of the market, which is where the action has been all along during this recovery. But low end buyers have also been hit hardest in the unemployment numbers. First time home buyers, who would get the bigger credit of $8000, tend to be younger, and it is this very segment that is showing the highest unemployment rate. The move-up buyers get $6500, and when you're moving up from one home to another, likely losing some equity on the home you're selling, I'm just not so sure how much $6500 is going to matter when you're still looking at overall economic uncertainty.