Displaying items by tag: real estate

(New York)

The Fed seems almost certain to hike later this month, as well as in December. Rates heading higher looks like a certainty. So what does that mean for high yielding equity sectors which many Americans rely on for dividend income? The answer is a mixed picture. Pure rate-driven sectors like utilities, real estate, and telecoms will likely be hurt, but high-yielders like healthcare and and consumer staples should hold up better because their businesses can generate a lot of cash that can be returned to shareholders via dividends and buybacks.

FINSUM: Pharma has returned over 12% this year while real estate is just around 2%, showing how the former can outperform in rising rate environments.

(New York)
The last few months have been bleak for the US housing market. There has been a steady stream of negative data showing that the market is definitively slowing. Now a new one is emerging—bank lending is contracting quickly in the space. The fall off is so strong that banks are laying off workers in lending units. Both sources of demand for mortgages—refinancing and new home purchases—have dried up as interest rates and housing prices have risen. July showed the fifth straight month of declining home sales, coming in the time of the year when they should be strongest. Speaking about the state of home prices and mortgage demand, the chief economist at Fannie Mae says, “people are saying, ‘at these prices, and with rates rising, I’ll stay where I am’”.

FINSUM: We believe the US is in for a long winter of falling home prices. We think the market is at a turning point right now where sellers are trying to cling to high prices, but buyers have finally stopped giving in.

(New York)

The IRS just ended the best loophole in town for high income residents of high tax states like New York, California, Connecticut, New Jersey and Washington DC. Many high tax states had been working a loophole where residents could categorize their tax payments as charity donations, allowing them to deduct it from their taxes. However, the IRS has now closed that loophole effective today, meaning there is no way around the $10,000 SALT deduction limit.

FINSUM: It is no surprise home sales in the northeast are plummeting, as this is a serious economic issue for retaining the wealthy, and even upper middle class.

(New York)

The US real estate market has appeared to be on the ropes for several months. While the woes in commercial real estate have been apparent for some time, it is the recent reversal in the residential market that caught some off guard. Well, new data is out, and it seems to have cemented a new reality—housing is in full decline. Homes sales declined month over month, with a big drop in sales in the northeast. The home sales figure was the weakest in two years. The chief economist of the National Association of Realtors commented that “Too many would-be buyers are either being priced out, or are deciding to postpone their search until more homes in their price range come on to the market”.

FINSUM: The summer is usually a better time for home sales, so this comes during what should be a period of strength. Home prices seem bound for a correction given how pricey things have become at the same time as rates have been rising.

(New York)

The US real estate market is in a worrying period. New builds, home sales, and inventory have all been showing weak signs for the last few months, and it seems to portend the start of a reversal in the market after a long run higher. This week will see if the current downward trend holds, or whether the data was an aberration. New data this week will cover new and existing home sales, which the market will be watching closely for signs of a downturn.

FINSUM: Housing and building-related stocks have suffered this year on a worsening outlook. Our instinct is that housing has a hit a wall and may be at the start of a correction.