The 3 chart mashup shows U.S. Census Bureau data of renovation spending charted by BofA Merrill Lynch Global Research and republished at Zero Hedge as well as StockCharts.com charts of the $LUMBER index and the U.S. Home Construction ETF ITB.
Renovation spending began to plunge right after Hurricane Sandy in the fall of 2012 and the Lumber market has been plunging for 9 out of the last 10 weeks. In the short term, the U.S. New Housing Construction ETF (ITB) looks like it has started to roll over.
It is well reported that in some U.S. metro areas, housing is hot and buyers are bidding up prices due in part to the competition by global capital flight looking for safe havens and large institutional buyers looking for investment returns from the rental market.
Buy, hold and flip down the road works when financing and job security is not an issue for these HNWI buyers. Judging by the above charts, the broad real estate market is not in a position to build as many new units for sale or take on major renovations as they have in the past.
Recession for Others
For perspective, here is the CoreLogic S&P Case-Shiller U.S. Home Price Index showing the narrow trading band that prices have been in since the March 2009 Pit of Gloom.
Also included is the still declining U.S. Home Ownership Rate which is back to 1995 levels!
There are two worlds. One of those worlds has fewer individuals and they are buying real estate. Meanwhile for the rest, in the last 3 weeks, the 30 year national U.S. mortgage rate moved up 40 basis points (Zillow.com inset chart)