Economy

(Atlanta)

In what looks like a very positive sign for the housing market, US mortgage rates have just hit an all-time low. The 30-year rate for fixed rate mortgages is 2.98%. The stat comes from Freddie Mac and it is the first time ever that rates have fallen below 3%. The super low rates have sparked a refinancing boom and stoked confidence in the real estate market. Some have wondered why mortgage rates haven’t fallen faster given the plunge in the general yield environment. According to Freddie Mac, this is because banks have been so overwhelmed with demand for mortgages that lowering rates didn’t make sense. In Freddie Mac’s words “There is no point in lowering prices to gain business you can’t close anyway”.


FINSUM: It seems like rates may fall even further as lenders catch up with demand. Overall, the housing market is looking very strong.

(New York)

Investors are doing a lot of economic data analysis these days. As the economy picks up (for the most part) after the COVID lockdown, everyone is trying to guess the trend of the expansion. Well, in our search for new economic data, we found something that really stuck out to us as a positive: lumber demand. The whole lumber sector got hurt very badly in the first quarter as COVID shut down real estate construction. The collapse in demand led to a halt in production in the lumber industry. However, lumber demand for construction projects has come back faster than anyone anticipated and the supply chain cannot even keep up. Lumber prices rose 60% in the second quarter alone.


FINSUM: We think it is an excellent sign that builders and consumers have enough confidence in the economy and their financial positions to be able to create this kind of demand. V-shaped recovery?

(New York)

For those interested in dividend investing, REITs have always been a key area. While rate sensitive, they can also provide strong and steady income streams. REITs may seem particularly risky as a whole right now because of the ongoing reckoning in commercial real estate as a result of the pandemic, but there are still some good opportunities to be had. The reason why is that REIT dividends, which have fallen 20% since the beginning of COVID, have likely hit their floor. JP Morgan says “that the current 3.5% dividend yield for the REIT group should be sustainable at this point.” Some of JPM’s best REIT picks right now include Brandywine Realty Trust (BDN, yielding 7.6%), Four Corners Property Trust (FCPT, 5.5%), Welltower (WELL, 5%), Medical Properties Trust (MPW, 6%), and W.P. Carey (WPC, 6.3%).


FINSUM: As obvious as it is to say, in our view, the key to REITs right now is the area of real estate they focus on. Mall REITS—probably not, storage/industrial RETS—much better.

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