The Wall Street Journal published a report on the state of the U.S. home sales market. Wow…we’ve reached a peak not seen since February 2007. Existing housing supply, which is now at 4.3 months, is much shorter than the 6-month supply that’s often considered the sweet spot. When the supply duration drops below 6 months, housing prices usually increase since there are more buyers than sellers. For those readers that have experienced tight housing supplies, it’s a bit unusual and surreal. Consider listing your house for $350k and by day-end you’ve recevied 3-5 offers, all well above your asking price. Markets in California and New York City occasionally operate like this, but it’s unusual in the country’s heartland.
US Existing-Home Sales Highest Since February 2007
As can be seen in the article, the housing market continues to be robust, this, combined with low unemployment, reflects a strong economy. It also often reflects an economy that may be reaching a point for a slowdown. Housing is usually a lagging indicator. In other words, by the time that home buyers have enough money to bid up prices, inflation increases and the Federal Reserve will rain on the economic parade by increasing interest rates. This in turn increases the cost of buying a home so fewer buyers can afford a new home and prices decline, once again. Understanding economics can often seem elusive.
While it impossible to predict the economy, for many Americans life has never been better. The devil will be in the details of the Trump administration. He has espoused tariffs and restricted trade while lowering taxes and increasing spending on the military and infrastructure. These goals provide a wonderful basis for increasing budget deficits and, in the short-term, less growth for companies that export their products and services.
Let’s forget politics and economics for a week. Eat too much and enjoy the company of those around you. Happy Thanksgiving.
The Berkeley, Inc. Team
In another example of the advancement of the U.S. economy, Case-Shiller published the statistics on housing prices in the major metropolitan areas in the country. This index is a common measure that is touted by most of the major news sources and business publications such as the Wall Street Journal, Forbes, Fortune and the Disneyland Weekly.
If you only want the cliff notes version, then here's the conclusion: U.S. residential real estate continues to advance in nearly all the major geographic areas. Portland, OR leads the group with a 12.4% year-over-year gain, but Seattle and Denver were also strong. The index that reflects the Case-Shiller measure is just shy of the record set in late 2006.
This measure does not measure residential real estate in the smaller areas found int he Midwest or plains' states. We suspect that this helps illustrate the divergence in financial gains between the major coastal states and those in the center of the country.
If you were reading carefully and wanted to know how to subscribe to the Disneyland Weekly you'll be disappointed. It doesn't exist.
Home price gains in July slow according to the S&P Corelogic Case-Shiller indices
Mike & the Berkeley team
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2016 First Quarter Report: The Bear Market That Wasn't
As we’re testing a few ways to keep you (our clients) informed it would be appreciated if you let us know if you find some posts particularly useful, or, if the info seems useful but the format is confusing, let us know if you have something else in mind.
Below is a list of indices and benchmarks shown to summarize how the various public stock and bond markets have done for the week, YTD (year-to-date), and for the past year. This is a weekly email from Payden & Rygel.
As seen in the table, some stocks have positive returns YTD, but small US companies (Russell 2000), technology (NASDAQ), and Europe (DJ Stoxx Europe 600) are still negative. All of the major indices are negative over the past 12 months. We consider market conditions over the past year to be normal fluctuations as supply and demand drive the prices and quantities for goods and services. China states that its target growth rate is 6.5%. The US economy continues to bounce along with approximate future growth expected to be around 2%. It’s not the go-go 90's, but it’s better than a stick in the eye.
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Have a great weekend! Welcome springtime!
As most investors are aware it's been a tough beginning to the current year for investors. A client emailed us an article written via USA Today and we thought you would find it interesting. Thanks Andy!
How nervous should retirees be about market? An FAQ on stock volatility
Occasionally we like to post articles that give you some insight into how we form our opinions or stay informed.