MBA Mortgage Applications Increase 2 Straight Weeks

MBA Mortgage Applications - Weak Construction Spending Growth

Before getting into MBA Mortgage Applications, let's review construction spending growth. Construction spending growth missed estimates and decelerated sharply on a year over year basis. Private residential spending growth fell sharply.

On a month over month basis, construction spending fell 0.1%. That missed estimates for 0.3% growth and was on top of a 0.1% decline. This caused year over year growth to fall from 7.2% to 4.9%.

Spending on new single-family housing was down 0.5% month over month and 2.4% year over year. Spending on home improvement fell 0.9% monthly and rose 0.4% yearly.

Generally, home improvement spending falls when home prices fall. I’m not saying prices are falling. I’m countering the faulty belief that home improvement spending goes up when home prices fall. People want to fix up their home instead of buying a new one.

Spending on multi-family housing was up 1% monthly and 3.2% yearly. Private non-residential spending fell 0.3% monthly, but it was up 6.4% yearly.

MBA Mortgage Applications - Commercial office building spending was up 16.3% yearly. 

Those worried about business investment growth slowing should be comforted by this growth. Commercial subcomponent growth was the weakest in this category as it was only up 0.6%. Public construction spending was strong as the educational building was up 2.6% monthly and highway and street spending was down 0.1%.

As you can see from the chart below, private residential construction spending was only up 1.8% year over year as housing is weakening.

Truth is there needs to be a greater supply of entry-level housing in America. The most common age in America is 28. All these young millennials need new houses to move into.

Housing isn’t affordable. Lower prices and lower rates help, but more houses need to be built. Housing starts this cycle peaked at a rate closer to the average trough in past cycles than the average peak.

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