Residential construction across the board is slowing this year. Nonetheless, new housing starts enjoyed a slight bump of 1.6% in April. This uptick in housing starts offers a glimmer of hope, suggesting that construction projects continue to advance despite volatility surrounding Liberation Day. An alarming decline in building permits has many questioning whether this growth is sustainable.
According to this week’s new residential construction report, housing starts were up 12% in September. The decrease in building permits shows a more general pullback in residential construction work. At the same time, builders are facing an environment with high mortgage rates, a high inventory-to-sales ratio, and greater uncertainty around other policy changes. These circumstances add to a harsh climate for the housing sector.
It was good news indeed when, after a, the construction industry rebounded a bit in April. The overall number of housing starts rose to 1.57 million units on an annualized basis. This 4% bump is especially heartening considering the recent tumult in that sector of the market.
That positive outlook is tempered by the state of that leading measure, building permits, which took a steep dive of 8.7% in April. This drop is in concert with the retreating trend more generally witnessed by other leading housing construction indicators. For instance, the NAHB Housing Market Index fell to its lowest point ever in May.
Despite persistent high mortgage rates driving most potential homebuyers out of the market, there’s still a growing stock of unsold inventory. This high inventory-to-sales ratio places even more squeeze on builders, who have become much more reluctant to start new projects. The uncertainty over what future policies will be has added another layer of difficulty to their decision-making processes.
Sustainability Builders are facing many hurdles. They’re facing high borrowing costs and volatile capital markets in related sectors like tech. Most strikingly, we have seen tremendous volatility in stocks tied to Web-related, e-commerce, and other “new economy” sectors. In a rapidly appreciating market, price quotes can become stale rather quickly. This can lead to very large gaps between what investors view and what the real market prices are.
“Real-time quotes may not be accurate. Prices and trades move so quickly in a fast market that there can be significant price differences between the quotes you receive one moment and the next.” – Wells Fargo
Investors who want to ride the waves of this tricky new landscape need to be fully aware of what using limit orders will get them. Unlike a market order, a limit order dictates the maximum “order price” that investors are willing to pay for securities. It further goes on to establish a “sell price” at which they are willing to sell. Though not a warranty on execution, it offers better protection from surprise adverse price changes.
“However, it does guarantee you will not pay a higher price than you expected.” – Wells Fargo
The NASDAQ Stock Market quotes over 500 companies that have acted as market makers. They guarantee liquidity, but their role can introduce complications during times of extreme trading activity. When markets move quickly, execution orders can stack up, sometimes resulting in substantial delays and changed execution prices.