The U.S. existing home sales surged to an eight-year high. On Thursday August 20th, the National Association of Realtors published its report on exiting home sales for the month of July. (Source: The National Association of Realtors, August 20, 2015.)In July, total existing home sales increased two percent to a seasonally-adjusted annual rate of 5.59 million units in July from 5.48 million units in June. This marks the .
Soaring rents and stagnant wages have pushed the dream of homeownership out of reach for most Millennials, another signal of the country’s economic collapse since the 2008 financial crisis. According to a new report by Zillow, young Americans are now waiting longer than ever to buy their first house. On Monday, the real estate data firm announced the median age of first-time buyers rose to 34 between 2010 and .
We are seeing momentum in the real estate market dissipate—this is something readers of Profit Confidential shouldn’t be surprised about, as I have been predicting problems ahead for the housing market. In fact, I won’t be surprised if 2015 is the first year home prices decline since our last drop in housing prices in 2011.
Please look at the chart of the S&P Case-Shiller Index below.
Chart Courtesy of www.StockCharts.com.
The National Association of Realtors’ Housing Affordability Index has dropped 12% in the first five months of 2015. (Source: National Association of Realtors, last accessed July 16, 2015.)
In January, the qualifying income to get a mortgage for an existing median-priced home in the U.S. was $36,576. In May, buying a median-priced home would require $41,712 in income.
Let’s be honest; incomes in the U.S. economy haven’t increased by much .
One of the nation’s largest home builders crushed market expectations on Wednesday June 24th, signalling that a housing recovery may be here at long last.
Lennar Corp. (NYSE/LEN) posted strong second-quarter earnings of $0.79 per share, up from $0.61 during the same period last year. Revenue growth skyrocketed 46% to $2.4 billion from $1.64 billion in the previous quarter. (Source: Lennar Press Release, June 24, 2015.)
“The homebuilding market continued .
If you live in one of the top 20 metropolitan areas of the country, you have probably already witnessed a strong appreciation in your house’s value over the past several years. Based on my economic outlook for 2015, I believe there could be more to come for homeowners.
If you happen to own property in San Francisco or New York, you know the home prices in these areas have been .
In the month of May, the purchase of new homes in the U.S. reached its highest level in the last seven years, signaling that the housing market is recovering.
Sales of new single-family houses beat analysts’ forecasts, up 2.2% during the month of May. Stronger employment and higher disposable income were credited for the rise. (Source: U.S. Department of Housing and Urban Development, June 23, 2015.)
Some analysts speculate the .
Home prices rose to a six-year high last month, signaling the U.S. housing recovery is starting to pick up momentum.
Existing home sales came in at an annualized rate of 5.35 million units in May—their highest since November 2009. This is a 5.1% increase from April’s upwardly revised 5.09 million, and a 9.2% increase year-over-year. So far, existing home sales have been increasing year-over-year for eight consecutive months. (Source: National .
There’s a major problem in the U.S. housing market; the disparity between rent and disposable income growth has widened drastically and is making it harder for renters to become homeowners.
Disposal Income Trend Negative in the Last Decade
Before going into details, let’s look at the chart below. It shows the percentage change in the real disposable personal income of Americans. Real disposable income is simply personal income minus taxes, .
Ask any professional involved in the real estate market and they will tell you that when interest rates are low, it’s a great time to buy. Lower interest rates mean higher affordability because mortgage payments are smaller.
In December of 2014, the 30-year mortgage rate tracked by Freddie Mac stood at 3.86%—the lowest since May of 2013. (Source: Freddie Mac, last accessed January 27, 2015.)
With mortgage rates in the .
Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.
Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.
Estimates Aug. 30, 2015
Trailing 12-month EPS for Dow Jones companies (Most Recent Quarter)