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Housing Drag As NAHB Numbers Come In Four Points Lower Than Expected

Garrett Cook

NAHB on Thursday released its market index reading for May and results came in at 45.00 against estimates of 49.00, which is down from the previously reported 46.00.

The excess flow of money into housing that took advantage of cheap rates is stuck in waiting right now. According to NAHB Chief Economist David Crowe, “Builders are waiting for consumers to feel more secure about their financial situation."

The news Thursday morning has sent the SPDR S&P Homebuilder ETF (NYSE: XHB) into a two percent correction, reaching a low of $29.98 before rebounding slightly. Trulia also published new data that shows, over the past year, the housing market has become less affordable in almost every major metro area.

The problems that are here to stay with the housing market were covered by Benzinga CEO Jason Raznick on Tumblr last week. He has one paragraph that covers the problem plaguing home builders and the housing market quite well:

"The ramp-up in Median Sale Prices since their recent lows has been driven mostly through firms like Toll Brothers buying up land to build apartment buildings (as renting has become more popular), condominiums and senior housing complexes.

This became a popular move by many firms flush with capital seeking to take advantage of local governments who discussed capping property taxes and reassessing property values as a means to capture the “paid-in-cash” high-end individual buyers once properties reset to the newly inflated prices...thanks to low interest rates driven by the Fed QE program."

It's clear the housing market has problems coming around the corner with the Fed discontinuing QE and subsequently raising rates, which will in turn put a damper on the already very hot housing market.

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