Posts Tagged ‘U.S. real estate market’
While the U.S. real estate market is showing some encouraging signs, there continue to be concerns towards a possible real estate crash in Mainland China. The Chinese government has been trying to corral the price increases in housing with some success.
My feeling is that the short-term risk is high, but there is excellent long-term growth in China’s real estate sector. (I also like China’s retail sector; read “Luxury Retailers Loving China.”) You need to be patient and be aware of the risk.
There are over 300 million middle-class consumers in China, and as a group, they are hungry for a lifestyle similar to ours. Real estate is a key goal for the Chinese.
Standard & Poor’s analysts believe the real estate market in China is stabilizing, with buyers returning and home prices continuing to decline.
And in an ironic twist, at a time when California’s real estate market is struggling, the California Public Employees’ Retirement System (CalPERS), a state pension fund, announced it would be investing about $530 million in two new China real estate funds managed by ARA Asset Management, which is positive longer-term. (Source: “California State Employees Bet On China Real Estate,” Forbes, September 24, 2012.)
To play China’s real estate market, you can take the more conservative approach and buy the Guggenheim China Real Estate (NYSE/TAO) exchange-traded fund (ETF) with a year-to-date return of 25.5% as of August 30. The fund holds mainly large value-oriented Chinese real state stocks.
Chart courtesy of www.StockCharts.com
But to take a more speculative and potentially higher-return opportunity, an emerging small-cap Chinese real estate company that I … Read More
Readers of Profit Confidential have made their voices heard on the topic of rapid inflation. In our recent survey, over 2,000 of our readers said they believe we are experiencing rapid inflation closer to 10%, while the official government Consumer Price Index (CPI) states that inflation is at 2.9%.
On these pages, I have been detailing the input cost (Cost of Goods) for manufacturers—higher commodity prices—from many parts of the world. In the next month, the first-quarter earnings reports start coming out and major U.S. companies will give us a good idea of how 2012 will shape up in terms of economic growth and rapid inflation.
But some companies have already started crying the blues…
On its conference call this week, Sears Holdings Corporation (NASDAQ/SHLD) cited a significant increase in commodity costs, particularly cotton, as one of the reasons for its margin decline.
Many restaurant chains across the nation have been discussing their biggest struggle: raising prices for food on their menus…weighing high commodity prices—like the rise in the price of beef—against the fragile economic recovery.
Beef prices have climbed 30% over the last two years, and many restaurant chains do not believe the rise in commodity prices—rapid inflation—will subside anytime soon. Some are getting creative; ensuring they serve their steaks with the bone, so customers feel as though they are getting more meat on their plates for that higher price.
ConAgra Foods, Inc. (NYSE/CAG), a global food maker of such products as “Chef Boyardee” and “Banquet” frozen meals, just released its fourth-quarter numbers, which slightly exceeded expectations—but the company lowered its expectations for the current quarter and sees … Read More
A few months ago, I wrote about the U.S. real estate market changing from a “buyers’ market” to a “renters’ market.” This is evidenced by the fact that home prices, on average, have fallen by 32% since 2006, while rents have risen 20%, on average, since that time (source: Wall Street Journal).
Not only were potential new home buyers afraid to enter the U.S. real estate market after the collapse that occurred in 2007, opting to rent instead, but I also commented on the fact that private-equity and hedge-fund money was finding its way into the U.S. real estate market.
The latter bought home foreclosures, contacted the families living in those homes, and attempted to sign a rental agreement with them. In this unusual U.S. real estate market, it presents a win-win situation, as the hedge-fund and/or private equity firm makes money on its investment, while the owner gets to keep his/her home, albeit as a renter.
It has been shown that home foreclosures in the U.S. real estate market, if the property is left vacant, can further drag down the property values in the neighborhood.
At the time, I mentioned that Fannie Mae and Freddie Mac were possibly going to begin a pilot program to convert homeowners to renters, as a way to stem the oncoming home foreclosure onslaught that will visit the U.S. real estate market this year.
The Federal Reserve Bank of New York expects at least 1.8 million home foreclosures in the U.S. real estate market in 2012.
Student loan debt is now larger than the country’s total credit-card debt (source: Consumer Bankers Association). So much for encouraging consumer spending.
The Federal Reserve Bank of New York recently reported that roughly 27% of student loans were more than 30 days past due. Don’t expect that 27% to increase consumer spending. (Also see: U.S. Student Loan Crisis Developing.)
The reason for this distress in paying student debt is the weak economy that is not producing enough quality jobs with good salaries, placing great strains on consumer spending. The Bureau of Labor Statistics estimates that the current unemployment rate for those aged 20-24 is close to 14%, while the unemployment rate for those aged 25-34 is 8.7%.
While the Bureau of Labor Statistics estimates the unemployment rate among these age groups, it doesn’t capture the underemployed—workers taking lower paying jobs or part-time work or work that doesn’t reflect their skill set—accurately, but just last month, the Pew Research Center released its latest study on the situation.
It finds that the unemployment rate among the young is double the national average, placing more strain on consumer spending. It also finds that, although all age groups were hit hard during this latest recession that began in 2007, those aged 18-24 were hit the hardest, as evidenced by the unemployment rate. This certainly affects consumer spending.
Those who are lucky enough to get jobs are likely to experience pay that is 10%-15% lower than those with … Read More
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