Latest US Housing Figures Are Welcomed By Hawks

The FTSE 100 opened at 6017 and trended upwards through the day where it eventually closed at 6061 (+0.72%). Supergroup, a FTSE 250 company within Personal Goods, saw their shares jump today on the news that half year revenues had grown by 22% and underlying PBT (profits before tax) was up 54% year-on-year. The company opened 14 new stores during this trading period and noted women’s wear was growing much quicker than other ranges, but it was their online business which helped boost profits. Supergroup eventual closed up by double-digit figures (+12.14%).

Across the pond US housing starts and building permit data was out today. The housing market is showing signs of momentum as housing starts increased month-on-month, after seven-month lows, to 1.17million from 1.06million in October showing an increase of 10.7%. Furthermore, housing permits rose by 11.0% m-o-m to 1.289million from 1.161million. Both figures came in above market expectations as economists expected figures of 1.14million and 1.15million respectively. Most of this increase came from multi-family homes (13.1% increase), however, single-family homes were up by double-digit figures too (10.5%).

This is timely news for the hawks who are expecting the Fed to announce a rate hike today at 7pm GMT. If the benchmark is increased, it will be the first rise in just over nine years. Economists believe an increase in the base rate will not have an impact on the housing recovery in the US, however, we could see an increase in defaults within the oil & gas market as debt becomes more expensive.

Construction on new homes remains low as there appears to be a shortage of land and labour, this in turn is leading to a delay in projects which could have a delay in trickling through into reported figures. Despite there being job growth, wage growth has remained relatively flat over the last five years and so even if a shortage did not exist for land and labour, getting on the property ladder is appearing to be hard as soaring rents and a 5.8% y-o-y increase in house prices (October figures) are making it harder to save for a deposit. As house prices rise faster than salaries, mortgage payments are likely to represent a bigger portion of household income and the increase in rates could make it harder still as mortgage payments would likely rise.

At the close, European indices were up with the FTSE 100 +0.72%, the CAC 40 +0.22%, and the DAX +0.18%. Asian indices were also up for the day with the Hang Seng +2.01% and the Nikkei 225 +2.61%. At the time of writing this, US indices were up with the NASDAQ +0.26%, the S&P 500 +0.35% and the Dow Jones +0.18%.