Posts Tagged ‘home prices’
Housing Recovery Already Comes to an End?
By Michael Lombardi, MBA for Profit Confidential
The housing market simply isn’t improving at the rate many in the mainstream media are telling us.
Home prices are still significantly lower than what they were during 2005 and 2006. On its own, there is no housing market recovery. All we are witnessing is the mere reflection of easy money provided by our central bank.
As I often write, to see a real recovery in the housing market, we need to see first-time home buyers active in the market. Unfortunately, they are not involved.
In April, first-time home buyers accounted for only 29% of all existing home purchases in the U.S. housing market. This was three percent lower than the previous month and 17% lower than April 2012, when first-time home buyers accounted for 35% of all home purchases. (Source: National Association of Realtors, May 22, 2013.)
According to a survey by Fannie Mae, last month, 40% of Americans said it’s a good time for them to sell their home. In April, the survey showed only 30% thought the same thing, and in the same period a year ago, this number stood at 16%. (Source: Realtor Magazine, June 11, 2013.) Hence, we are going to see more listings hit the housing market.
The inventory of homes for sale in the U.S. housing market increased four percent in April from the previous month nationally, but what’s troubling is that in a few areas, such as Stockton and Sacramento, California, new listings have surged 75% from a month earlier.
The basic concept of economics: when demand declines and supply increases, prices go down.
And the most common mortgage in the … Read More
Retail Growth Healthy, but Best Gains Have Already Been Made
By George Leong, B.Comm. for Profit Confidential
We all know that consumer spending and the performance of the retail sector dictates the direction of economic renewal in the U.S. It’s quite simple—if consumers spend, the economy and the retail sector will grow.
Now, with home prices nationwide continuing to rise and the jobs creation picture showing signs of improvement (though it is still slogging along), the end result has been a rise in consumer spending, which has helped to drive the retail sector.
Spending on durable goods is a good indicator on how positive consumers are in the retail sector, as this spending is on nonessential goods. So when consumers spend on this group, you know there’s some confidence in the overall economy. In April, durable goods surged 3.3%, which was well above both the Briefing.com estimate calling for a 1.5% decline and the 5.9% decline in March. On an ex-transportation basis, durable goods increased 1.3%.
Retail sales edged up 0.1% in April, which was above both the Briefing.com estimate calling for a 10.7% drop and the 0.5% decline in March.
In May so far, 10 U.S. retail chains have reported, and the results have been good, with the key same-store sales surging up 3.9% versus the 3.7% estimate. (Source: Wahba, P., “Retailers’ sales rise in May, spending stays moderate,” Reuters, June 6, 2013.)
Results from the big-box stores continue to be healthy in the retail sector.
Market leader Costco Wholesale Corporation (NASDAQ/COST) reported sales growth of seven percent in May, while its key same-store sales increased by five percent.
A big surprise was delivered by American Apparel, Inc (NYSE/APP), which reported an impressive 10% surge in … Read More
Best Explanation on the Fake Housing Market Recovery I’ve Seen
By Michael Lombardi, MBA for Profit Confidential
The average American Joe isn’t participating in the U.S. housing market. As a matter of fact, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, investors purchased 69% of “damaged” properties in April 2013, while first-time home buyers accounted for only 16% of “damaged” purchases.
It is very well documented in these pages how home prices in the U.S. economy are being driven upward by institutional investors. Affirming my stance on the U.S. housing market, Suzanne Mistretta, an analyst at Fitch Rating Services, was quoted this week as saying, “The [housing price] growth is being propelled by institutional money… The question is how much the change in prices really reflects the market demand, rather than one-off market shifts that may not be around in a couple of years.” (Source: Popper, N., “Behind the Rise in House Prices, Wall Street Buyers,” New York Times Dealbook, June 3, 2013.)
Major financial institutions like The Blackstone Group L.P. (NYSE/BX) have become major buyers in the U.S. housing market. Blackstone has spent more than $4.0 billion for 24,000 homes in the U.S. housing market that it plans to rent out.
Rising prices on homes in various pockets of the U.S. housing market are a direct result of large institutional investors buying in.
Take Atlanta, for example. Blackstone bought 1,400 properties worth more than $100 million in Atlanta last year. (Source: Bloomberg, April 25, 2013.) And what happened to prices for homes in Atlanta? According to CoreLogic, a housing data compiler, home prices in Atlanta increased 12.4% in the 12-month period ended February 2013, compared to a 10.2% increase in the overall U.S. housing … Read More
What Housing Recovery? Percentage of First-Time Home Buyers Falls Again in April
By Michael Lombardi, MBA for Profit Confidential
It’s almost as if the mainstream media is defining the U.S. housing market as being “hot,” while some economists are calling for robust growth ahead. But the reality is that we are far from a recovery in the housing market and more troubles could follow.
As I have discussed in these pages many times before, institutional investors are running to buy homes for rental income, because the yields elsewhere are getting thinner. As a result, we’ve experienced hikes in home prices in the U.S. housing market.
Institutional investors rushed to buy homes with the philosophy of buy cheap, renovate, and rent. But they might be in for a surprise. According to real estate research firm Trulia Inc., since 2005, there have been almost four million single-family homes added to the rental market. That supply has met the demand created during the crisis in the housing market. (Source: Trulia Inc., April 4, 2013.)
As a result, the rental rates that institutional investors were banking on are actually compressing. Take a look at the table below, which depicts the year-over-year change in rental rates and home prices in some major cities in the U.S. economy.
|
U.S. City |
Year-over-Year % change in rental rates for single-family homes |
Year-over-Year % change in single-family home prices |
|
Las Vegas, NV |
-1.9% |
24.6% |
|
Fort Lauderdale, FL |
-1.2% |
10.7% |
|
Chicago, IL |
-1.2% |
3.6% |
|
Orange County, CA |
-0.7% |
13.7% |
|
Washington, DC |
-0.7% |
6.2% |
As institutional investors are paying more for homes, their rental income is getting softer.
And the fact of the matter is that we are missing the most important piece of the puzzle for a … Read More
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