The last Housing Market Review covered data released in December, 2015. At the time, I saw the market coiling like a spring. Instead of springing forth, housing market stocks are in big retreat. Recession fears likely have a lot to do with the declines. The iShares US Home Construction ETF (ITB) is now down a gut-wrenching 18% year-to-date. ITB trades at levels last seen October, 2014. The S&P 500 (SPY) is trading at the same relative level, but it has “only” declined 9% year-to-date.

iShares US Home Construction (ITB) has had a very rough start to the year even in the wake of relatively good housing data.

Source: FreeStockCharts.com

Ironically, the housing data for 2015 that preceded ITB’s plunge set post-recession records across the board…

New Residential Construction (Housing Starts) – December, 2015
Privately owned housing starts for 1-unit structures came in at 768,000. The November 1-unit starts were revised upward to 794,000 and became the new post-recession record. This beat out the previous record of 758,000 hit in July, 2015.

Housing starts for 1-unit structures continue a volatile upward trend that launched in late 2014.

Source: US. Bureau of the Census, Privately Owned Housing Starts: 1-Unit Structures [HOUST1F], retrieved from FRED, Federal Reserve Bank of St. Louis, February 9, 2016.

The 6.1% year-over-year gain and 3.3% month-over-month drop are consistent with the mixed picture from the confidence of home builders (see below). The Northeast led the regions with a 25.0% year-over-year gain. The West and the South followed with 10.4% and 10.0% gains respectively. The Midwest lagged again, this time with a very large 18.9% drop. The poor performance from the Midwest stands in stark contrast to the slowdown/drop I keep expecting to see in the South region because of Texas.

The solid end to the year selaed the deal on the strongest full year since the financial crisis and recession. Of course, starts are still at recessionary levels, but the trend and momentum continue to be encouraging.