I wrote about this one here.
Today's report:
HOUSING STARTSPrivately-owned housing starts in April were at a seasonally adjusted annual rate of 1,072,000. This is 13.2 percent (±13.6%)* above the revised March estimate of 947,000 and is 26.4 percent (±11.8%) above the April 2013 rate of 848,000.
Here is the link at Census.gov.
6 comments:
1M homes annual / 12 mos = 83k in the month...
If we look at Bank Credit in April, the Closed end residential loans were only up $5B
http://www.federalreserve.gov/releases/h8/current/default.htm
So $5B/83k = $60k so no way are all of these houses being financed under Bank Credit... or they are spec starts which I highly doubt...
So there must exist an alternate finance channel directly between the govt GSEs and the homeowners...
So it may be working like this:
1. GSEs issue bonds;
2. Fed buys the GSE bonds;
3. GSEs use the balances of the proceeds of the bond issues to the Fed to fund the loans to the homeowners;
4. Homeowners pay principle and interest to GSEs monthly;
5. GSEs pay the interest to the Fed;
6. GSEs pay the principle to the US Treasury as "dividends"; pat themselves on the back as this results in short term "deficit reduction";
7. Fed pays the interest received back from the GSEs who got it back from the homeowners to the US Treasury; pat themselves on the back as this results in short term "deficit reduction";
8. Rinse and repeat;
Once the moron bankers figure out that the govt is doing their job for them, they will probably start to complain and call for an end to the QE and to shutdown the GSEs.... but this may take a while with these people before they will figure this out...
In the meantime we can enjoy a return to some higher levels of household formation which has been long in coming.... so lets enjoy it (while it lasts until these morons figure out how to F all this up again...)
rsp,
Congress is already working on shutting down the GSE's.
Isn't Gundlach short the homebuilders? That's his "big trade" these days.
Mike,
I have to look more into this... if this is what is happening, then the Fed stopping the QE might shut this system down... if "the banks" are not in a position to "take the handoff"... this hedge fund person may get a sell off in the builders if they lose their current finance channel....
IOW it seems the Fed itself is fomenting the lending indirectly thru the GSEs... so what they have to do is to get "the banks" to do this intermediation and the worry would be "the banks" might not be up for it...
"Somebody" has to do the lending... for a while now it may have effectively been the Fed/GSE tag-team... but that way looks zero sum at best and maybe even dollar negative as eventually, the balances end up back in the Treasury... as "excess earnings" of the Fed and "dividends" from the GSEs....
The thing with "the banks" is they need an increase in system income in order to increase credit...iow the way I look at it, we get a YoY increase in $NFA injection thru fiscal spending increases and THEN "the banks" can leverage that increase in leading system income... when the system is "working" so-called...
For now though, the GSEs are "not a bank" and cant directly "credit a bank account"... so what they are doing lately is acting in concert with the Fed and the Fed "credits the GSEs bank account" thru the GSE bond issuance process and then the GSEs "lend the money" to the homeowners... When the homeowners pay back the P&I it eventually ends up back in the US Treasury and makes "dollars harder to get"... the $4T+ of fiscal injection provides the "leading flow" that sustains this process, but as we know, that flow has been in a YoY flatline and looks to at best remain so for the remainder of the FY, so we see more or less 0% growth ... I have hope for next FY we'll see...
Right or wrong it has at least been working to the point where we are now finally back above 1M units after years of results WAY below this... and some people are able to start some households in new homes...
If the banks start to take over, it will make "dollars easier to get" as it ramps up as the P&I doesnt end up in the Treasury in the end if the system is operated that way, it stays in the non-govt sector... and Fed ends QE and UST interest ends up in non-govt too, again "dollars easier to get", etc...
rsp,
The headline number includes multifamily/apartment buildings, I think... so no financing or cmbs? I think Gundlach was talking about 1m single family residential starts
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