New home construction has been trending higher in 2015 and reached its second-highest level since 2007 last month. A lot of the growth in new home construction has been driven by apartments. Unfortunately, the impact on the overall economy from multi-family housing construction is smaller than the impact from single-family housing construction. According to the article, each multi-family housing start creates two jobs over a one-year period, but a single-family housing start creates four to five jobs. Positively, single-family home construction may be poised to increase in the coming months. Permits for single-family home construction increased last month to their highest level since January 2008.
After Greek voters on Sunday overwhelmingly voted against accepting bailout conditions that impose further austerity measures, Greece’s future in the Eurozone remains unclear. This piece from Stratfor published on MarketWatch.com explains that the Greek government is likely to view the referendum results as a bargaining chip to renew negotiations with its creditors. However, Greece’s creditors are unlikely to make concessions at this point, with the potential for the deepening banking crisis to quickly erode public support for Greece’s current leaders. The article also cites other motivations for European leaders to resist making fast concessions to Greece following the referendum, including the dangerous precedent it would set for other Eurozone members.
The following MarketWatch.com article illustrates that market breadth (how widely individual stocks are participating in broader stock index moves) is weakening and investors should be careful when trying to position their portfolios. Over the trailing one-year period, the Nasdaq Index is up 13.1%, while the NYSE Index is down 2.5%, indicating that there has been a significant gap between “winners” and “losers.” Interestingly, the latter category includes a number of the traditionally more conservative categories including value, dividend focused, and equity long/short. The concern is that investors who may have missed out or not participated in the rally over last year may look to tilt their portfolios to the more aggressive categories that have been the recent outperformers. And, history shows that these emotional moves often don’t produce the desired outcome.
The meltdown in China’s equity market could potentially have a bigger impact on the global economy than the more publicized Greek debt standoff. This New York Times article details the growing list of measures that the Chinese government has instituted in recent weeks in an attempt to halt stock market declines. Thus far the attempts to support the market have proven futile, with the Shanghai composite experiencing its biggest three-week percentage decline since 1992. The potential for political and economic upheaval in the world’s second-largest economy make the plunge in China’s equity market a story to watch in the coming weeks.
Homebuilder confidence climbed to its highest level in nine months, providing optimism that the housing recovery is gaining momentum following a weak first quarter. Builder confidence increased to 59 this month from 54 in May (above 50 signals positive sentiment), according to the National Association of Home Builders. Additionally, current and future sales expectations increased to their highest levels since the fourth quarter of 2005. Housing data has picked up steam recently. Residential construction spending and pending home sales are both at multi-year highs.