Investing in real estate is when investors look to the property market for positive returns. Investing in real estate involves buying and managing properties, and there are several criteria for success. This includes the interest rate, expectations of price appreciation, and, when considering rental units, the level of vacancy. For income seekers, looking at investing in real estate versus the prevailing 10- and 30-year bond market would indicate that the property market might offer a good long-term alternative.
There are two key variables that continue to hamper the country’s economic renewal—the housing market and jobs growth. Unfortunately, while both are showing some encouraging signs, I feel it will still be several years before we see sustained strength in both. Without jobs or the confidence of getting a job, you cannot expect people to buy houses.
The housing market is clearly better than it was when the subprime mortgage fiasco led to a downfall in theU.S.economy and sent the unemployment rate spiraling higher. Yet we continue to see home prices decline across the top 20 metropolitan cities in America.
In November, housing starts came in at seasonally adjusted annual rate of 685,000 units, according to the Commerce Department. The reading was the highest since April 2010, but still well below the monthly one million plus housing starts that make up what is considered a healthy housing market.
Building permits of 681,000 in November were also ahead of estimates; but again the number is far below what is widely deemed to be a healthy housing market.
What the readings offer is some hope of better readings to come, albeit as I said, we also need to see a concurrent strengthening in job creation to drive a strong housing market. With strong jobs growth, consumers become more confident in buying homes and big-ticket items. Unfortunately, this has yet to happen and I feel it will not be until at least 2012 and 2013 before the situation in the housing market improves.
A strong housing market is critical for the retail sector as homeowners will tend to buy new furnishings, including many … Read More
The Dow Jones Transportation Average is now showing some real strength around the 4,500 level. This important index got hammered quite significantly. It dropped about 1,000 points since the beginning of July and you can see this in many of the railroad stocks that dropped like a stone when the broader market began to correct.
Smaller companies are the backbone of the economy, but they are also the ones that struggle the most when the domestic economy isn’t growing. Accordingly, domestic small-cap stocks should have a more difficult time than larger companies that can “pad” their earnings from international operations and a weaker dollar. This is why I expect the Dow Jones Industrial Average (DJIA) to outperform all other major home indices going forward.
As I have been saying, housing continues to be a cesspool for capital. The latest reading from the S&P/Case-Shiller Home Price Index of 20 major metropolitan areas in the United States continues to show declines, which, in my economic analysis, is not good.
It will take a bit of good fortune, but I think the S&P 500 Index can achieve 1,500 this year. We’ll likely get a correction or some sort of prolonged consolidation in the not-too-distant future and, barring any unforeseen shocks to the system, the stock market should reaccelerate due to continued growth in corporate earnings.
One of the best benchmark companies to follow is Johnson & Johnson (NYSE/JNJ). This $175-billion pharmaceutical and consumer products giant sells all kinds of products that you probably have in your home right now. The technology sector is important in this economy and so are the financials, but it’s a business like Johnson & Johnson that you can think of as a staple Dow company.
Three major trends in the financial markets, all from which investors can make money, continue their development this morning…
Trend #1: Rising long-term interest rates. The 10-year U.S. Treasury hit a yield of 3.6% Friday morning. My forecast calls for the bellwether 10-year Treasury to easily sail past 4.0% this year.
During the technology euphoria in late 1999 and early 2000, I recall a friend of mine had taken out a massive loan against the value of his home and bet on several high-risk micro-cap stocks. I remember his position surging from $100,000 to nearly two million dollars in less than two months. He asked me my investment advice on what to do. I said take profits. He did not listen and sat on the two stocks all the way back to well below his initial investment!
If you are a buyer, the current housing market continues to afford good opportunities, whether as a principal residence or as an investment property. If you are looking for beachfront housing in Florida, there may not be a better time to buy than now. Then again, the housing market remains in a flux driven by high unemployment and record foreclosures.
China has rapidly become one of the top travel markets in the world for both domestic and international travelers. To deal with the increased travel, China has been steadily building its road, rail and air infrastructure to make traveling in this country much easier.
“China is the most attractive place in the world right now for hotels. That’s why investment capital is racing there and why the major international brands are racing there too,” said Patrick Ford, president of U.S.-based Lodging Econometrics, in an article on www.time.com. China is the fourth top destination for tourism, but is expected to become the number one destination by 2020, according to the World Tourism Association.
China is predicted to see major growth in its domestic travel from 2011 to 2013, according to a research report, China Tourism Industry Forecast to 2012, by traveldailynews.com.
Online travel bookings in China are estimated to be at $15.4 billion by this year, up from $1.5 billion in 2006, according to emarketer.com.
China’s travel industry is driven by a population of over 1.3 billion people and a steadily increasing middle class with money to spend on travel. As wages increase, so will the spending on non-essential items such as travel and recreation.
To handle the expected increase in travel, there is a push to build more hotels and motels across the vast country.
Chinese travel stocks are in favor. In the Chinese travel and hotel area, there are numerous operators. These include China Lodging Group, Limited (NASDAQ/HTHT), Home Inns & Hotels Management Inc. (NASDAQ/HMIN), and 7 Days Group Holdings Limited (NYSE/SVN).
All three companies have above-average, … Read More
When I first started PROFIT CONFIDENTIAL back in 2001, we were sending it to about 1,000 people; friends and customers of Lombardi Publishing. I was writing the issues alone. Today, we get as many as 2,000 people daily signing up to get PROFIT CONFIDENTIAL; it has gone “viral,” as they say.
The stock market’s been very strong since the end of August. Now it’s consolidating, which is healthy. But I have to repeat my steadfast view that investment risk for equities investors remains very high in the current environment. We can’t ignore the sovereign debt issue anymore.
The housing market does not exist in a vacuum. It has always been connected — albeit not too strongly — to certain long-term macroeconomic trends, such as employment, for example. Nevertheless, the relationship has always been positively correlated. When more people have jobs, home prices tend to increase, because new household units are created more easily, all needing roofs over their heads. Of course, it all ties into the overall economy, because, as the economy grows and both individual and corporate earnings improve, the real estate market typically prospers.
Unfortunately, the reverse is also true, at least if the unemployment downtrend persists over more than just a few months. When people lose jobs, home prices decrease, because the demand is taken out of the equation. And, if the job loss is not stopped for more than a year, a percentage of those who lose their homes to bankruptcies and foreclosures increases to the critical point where there are more sellers than buyers, pushing home prices sharply down.
Many developed economies have gone through housing bubbles and housing busts. However, what is going on now is something much more dangerous. What we are about to experience is a prolonged down-spiral effect that might be irreparable.
I believe by now that it is clear that the recovery has stalled because it appears more fundamental economic weakness is ahead of us. While in the past couple of months, the U.S. economy has generated new jobs, there is something else to consider. By the end of the 2010 Census, the economy will have to endure the impact of an estimated 1.2 million lost jobs … Read More
Too often lately, I’m hearing from my friends and colleagues, “I think the real estate market has hit bottom…I’m looking for investment properties to buy.” In my humble opinion, those who are looking to buy real estate now, because they believe property prices have hit bottom, are dead wrong.
After the U.S. government saved Wall Street’s skin last fall, one would expect more gratitude. But these days, all we hear from the Street are demands to level the playing field, keep the government’s nose out of our business, and let those who know how to play the game make sure the markets remain “fair and efficient,” that is, as fair and as efficient as they want it to be. This is Wall Street’s old song and dance, for sure. What is worrying market watchers and ordinary investors alike is just how little Wall Street has learned from the financial and credit debacles of 2008.
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