(CNBC Tradetalk) -- What's up with housing? We hear it's getting better, but the numbers have been...eh!
Here's what we know: there was a big increase in housing traffic this spring; we saw it in new and existing homes. Some builders (Lennar) did indeed report initial enthusiasm and what appears to be an increase in orders.
But after initial enthusiasm, it's not clear we are getting that. It's not clear that traffic is translating into sales.
March housing starts today were below expectations. One way to look at this is sequentially: how are they doing compared to the prior month. Disappointing:
March Housing Starts: (month over month, seasonally adjusted)
- Single family: down 0.2%
- Multifamily: down 20%
Why is this happening? There seems to be a disconnect between some reports of publicly traded builders and the numbers.
Here's two theories:
1) there is a lag between the order activity and the starts activity because of builder concern on financing. Cancellation rates have been running between 20 and 30 percent recently; builders are reluctant to start building until all the financing ducks are in place. This might account for the fact that we are hearing that orders are indeed up but not seeing building yet.
2) publicly traded home builders are taking a bigger share of the new order pie. This is creating the illusion that the overall pie is growing, when in fact it is not. Last year new homes were about 7 percent of the total housing market; publicly traded home builders are perhaps 30 percent of the new homes, so publicly traded builders are only about 2 percent of all housing sales (!). But they have been increasing their share of the market, so that is creating the illusion that the overall market is increasing.
