B2R Investor Intel: A Rollicking Ride on Wall Street
Yesterday, U.S. stocks experienced tumult not seen since February 2014, due mainly to investors’ concerns on falling oil prices and slowing global growth. Thankfully for our nerves, after such volatility Wall Street analysts expect the markets to go into corrective territory next week. The good economic news, as it has been for a while now, is housing. Existing home sales steadily increased for the third consecutive month in July to a seasonally adjusted annual rate of 5.59 million, remaining at the highest pace since February 2007. On the flip side, sales to first-time buyers have fallen to the lowest level since January, likely caused by low inventory levels and rising prices, according to the National Association of Realtors.
First-time buyers will account for 18 percent of new-home sales this year, estimates the National Association of Home Builders. That is well short of their share of 25 percent to 27 percent from 2001 to 2005. To try and attract more first-time buyers, builders are constructing smaller homes, with the median size dropping 40 square feet in the second quarter to 2,479 square feet, according to Commerce Department data.
Builder confidence in the market for newly built, single-family homes in August rose one point to a level of 61 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This level of confidence hasn’t been seen since November 2005. And they’re digging fast. In July, groundbreaking for single-family homes, which accounts for the largest share of the market, surged 12.8 percent to a 782,000 unit pace, the highest level since December 2007.
On the foreclosure front, there was a total of 124,910 U.S. properties with filings (default notices, scheduled auctions and bank repossessions) in July, up 7 percent from the previous month and up 14 percent from a year ago, according to RealtyTrac data. July marks the fifth consecutive month with a year-over-year increase in overall foreclosure activity following 53 consecutive months of decreases. Why the sudden increase? Explains Daren Blomquist, vice president at RealtyTrac, “[T]he recent rise in bank repossessions represents banks flushing out old distress rather than new distress being pushed into the pipeline.” Foreclosure starts in July were indeed at the lowest level since November 2005.
Rising housing costs are bumping up inflation for consumers, despite only very mild price increases for many goods. The consumer-price index rose a seasonally adjusted 0.1 percent in July from a month earlier, according to the Labor Department. Over the past year prices are up a marginal 0.2 percent, but excluding food and energy, the gain in what is known as the core index was a more solid 1.8 percent. The year-over-year increase in core prices reflects larger rent payments. From a year earlier, rent prices were up 3.1 percent in July, the largest annual increase since early 2008.
Rate watch 2015: The Fed has said it won’t raise rates until it is more confident inflation will rise toward its 2 percent target, but developments abroad—particularly slowing growth in China—are complicating the move. Officials have long signaled they intend to start raising short-term rates before year-end, but in the July 28-29 policy meeting there was no indication they would start at the next September meeting.
To conclude our round-up for this week, it’s a good time to be a real estate investor with a roof over your head in times of market volatility.
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