Market Talk

Housing Construction Drops in April But Still Near Decade Highs

The housing market is a crucial driver of the economy. Despite all it’s positive influences on the economy, the other side of the equation is that housing affordability has become a more significant issue all across the country. One of the ways developers are riding the trend of rising prices is to build apartments. After all, it’s generally cheaper to rent than buy although they’re both getting pretty pricey in many cities.

In April, there was a 3.7% decline in new housing starts, which as led by an almost 13% decline in new multifamily (5 or more unit) projects. That means developers are pulling back on all new apartment, condo and townhouse construction. However, the multi-family data is the most volatile. Single-family housing starts are a more stable and reliable indicator of the underlying strength of the housing market. There was a tepid 0.1% increase in single-family starts, to 894,000.

Interest Rates Pass 3% On 10 Year Government Debt

The interest rate on the 10 year US bond surpassed the widely watched 3% threshold last week, rising to the highest level since 2013. That’s a big deal because now the US is paying a higher interest rate than any other developed country. The news sent the dollar higher as US debt becomes relatively more attractive versus other countries. That could spell trouble for investment in emerging economies since investors in developed countries are more cautious to take a risk when higher interest rates are available to them domestically. For the consumer, higher interest rates on loans could eventually put a damper on the housing market and the economy as a whole.

Job Openings At All-Time High

The employment sector of the economy is still running rather hot. Jobless claims last Thursday came in at 222k, which compared favorably to the consensus of 208 – 230K. Job openings advertised by employers also posted an all-time high in March of 6.6 million.

Wells Fargo Has Another Scandal

Wells Fargo, which has been trying to earn back customer trust with TV and newspaper ads found itself facing another scandal. This time it’s due to how it handled business banking information. First reported in the WSJ, the bank falsified business account holder information including Social Security numbers and dates of birth in 2017 through 2018 to meet a regulatory deadline. The bank, which is known as a money center bank because it primarily lends to large institutions is already limited from expanding its business by Federal regulators from a previous scandal. With the Office of the Comptroller of the Currency investigating the new employee-raised allegations, it appears those restrictions will remain in place for now.

Consumer Spending Data Rebounds

Consumer spending in Q1 of 2018 was soft, in what some economists explained as a quirk in seasonality of the data. This appears to have been the case, as there was a strong rebound in consumer spending the 2nd Quarter with a gain of 0.3% in April. That puts the economy on track for an over 3% GDP growth rate in the quarter as estimated by analyst Michael Pearce. One area of concern is rising gas prices, which could redirect some of that consumer spending. Gas prices are expected to continue to climb within the seasonal cycle of higher rates for the summer driving season.

Starbucks Revises Store Policies

Starbucks announced that its restrooms are available for everyone, regardless of whether they are a paying customer or not. Even though this is a significant leap, CEO Howard Schultz said, “We don’t want to become a public bathroom.” Also, shared spaces are available to both customers and non-customers as the company seeks to build a more inclusive environment.

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/meghan Gardler