US Housing Starts: Despite the drop, home building remains exceptionally strong – Wells Fargo

Matías Salord FXStreet

The Housing Starts report showed a decline of 7% in July to 1.534 million (annual-unit). According to analysts at Wells Fargo, point out that despite the drop, home building remains exceptionally strong. They explained that overall housing starts have averaged a 1.577 million-unit pace over the past six months, such a pace would mark the strongest year for housing starts since 2006.

Key Quotes:

“Housing starts fell 7% in July to a 1.534 million-unit pace. Data from prior months were revised modestly higher, which makes the decline less worrisome. Moreover, building permits rose 2.6% and are once again comfortably back above starts. Home builders are still dealing with massive supply shortages and are having to manage the flow of their projects to a much greater degree than ever before.”

“Even with these challenges, the industry is on a pace to begin construction on close to 1.6 million homes this year, which would be the best year for housing starts since 2006.”

“Prospective buyer traffic has also slowed. One of the reasons buyer traffic is off is because builders have relatively few homes to show prospective buyers. Affordability is also a hurdle for many potential buyers, and the reopening of the economy, particularly the return to work and return to school, are competing for prospective buyers' time right now.”

“While housing starts fell more than expected, most forecasters, including ourselves, were looking for a decline in July. There is no question that home building has hit some sort of near-term ceiling, with surging home prices reducing affordability and leading to a record drop in the proportion of consumers that feel now is a good time to buy a home.”

“We recently boosted our forecast for multifamily starts for this year and next, based on the recent strong absorption numbers and rise in apartment rents.”

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

AUD/USD remains offered; supported by 0.7100

AUD/USD adds to Monday’s retracement, although it manages well to keep the trade above the 0.7100 yardstick ahead of the opening bell in Asia. Once again, the softer tone in spot follows decent gains in the Greenback amid rising bets for a Fed rate hike on Wednesday.

USD/JPY extends gains toward 155.00 amid USD resurgence

USD/JPY keeps pushing higher toward 155.00 early Tuesday, looking for more upside, as traders await the FOMC and BoJ meetings this week. Meanwhile, Fed rate-hike bets and oil-driven inflation risks keep US bond yields near multi-year highs, supporting the US Dollar and the pair. That said, a more hawkish repricing of the BoJ normalization path might continue to underpin the Japanese Yen and could limit USD/JPY's upside. .

Gold set to fall toward $4,000 as Warsh faces a Fed rate-hike dilemma

As the Federal Reserve monetary policy announcement approaches and the Middle East war intensifies, the US Dollar resumes its advance. Gold price posted a tepid attempt to recover its shine in early August, but with renewed USD demand, the bright metal faltered miserably and is now closer to the $4,000 mark than the encouraging $4,700 peak from a month ago.

Bitcoin pulls back as valuation ceilings hold while XAU weakness persists

Bitcoin (BTC) corrects alongside the broader cryptocurrency market on Tuesday as selling persists ahead of the United States (US) Federal Reserve (Fed) monetary policy decision. Market participants expect the central bank to raise interest rates to 3.75%-4.00% on Wednesday, potentially weighing on risk assets.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.