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Housing Starts, Building Permits Hit Record Lows

Last updated 2/18/2009 8:50 AM ET (GMT -5) 0 Comments - Add your comment

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Kathy Lien

Director of Currency Research, GFT

Housing starts and building permits plunged to a record low in the month of January.  Only 466k new homes began construction last month, compared to 560k the prior month.  521k building permits were filed compared to 547k in December.  In the cycle high, we had as much as 2.273 million new homes beginning construction in one month (Jan 2006) while 2.263 million building permits were filed in September 2005.  

The housing data was worse than the market expected but not hardly surprising given fears about job security and the difficulty of attaining mortgages.  Banks now have very stringent rules about who they lend to and even if the borrower has enough down payment, the building itself may need to have a certain level of occupancy.  These onerous terms only exacerbates the problems in the housing market and prevents a recovery.  

Import Prices Continue to Fall

Meanwhile inflation is a big focus this week with producer and consumer prices due for release. Import prices dropped 1.1 percent last month which was less than the market expected but the annualized decline in import prices hit 12.5 percent, a record low. The strength of the US dollar and the decline in commodity prices should relieve fears of inflation. At this point, Federal Reserve officials are much more concern about disinflation and possibly deflation than inflation.  

Currency traders have completely shrugged off the report since weakness in the housing market has been discounted.

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.