Monday Markets, Part 2
Last week was a tough week for folks in the stock market. I offered ideas to take advantage of the real estate market in this negative climate. Two newspapers [unintentionally] ran a number of articles and ads to reinforce what I said earlier.
• U.S. Existing-Home Sales Reach Prerecession Pace. Written by Anna Louie Sussman and published by the Wall Street Journal, August 20, 2015.
o Synopsis: Sales of existing homes climbed in July to their pre-recession pace. However, a lack of inventory and rising prices may curtail further gains. Existing homeowners have an edge over buyers. “We have to recognize that we have a broad-based housing shortage,” said Lawrence Yun, the NAR’s chief economist. “Home builders have been essentially out of the game or underproducing” since the crash.
Existing homes are selling at their pre-recession pace, there’s a shortage of quality homes, prices are up, and homebuilders aren’t in a place to ramp up to meet demand. Why?
• As Construction Heats Up, So Does Worker Shortage. Authored by Paul Davidson and published by USA Today on August 27, 2015.
o Synopsis: Though construction of single family homes and commercial buildings is up, a worker shortage is holding back the industry. Many construction workers who left construction during the recession found different work and are not returning to construction. This labor shortage is raising home prices 5.7% annually and construction wages are up 2.6%. The new construction shortage is forcing buyers to purchase existing inventory, which is lowering resale inventory and forcing prices higher.
A shortage of workers, increasing demand, and rising prices? Does this mean that we’re headed toward another overheated market, or are we seeing “safe” growth?
• Housing Offers Shelter From Market Storm. Spencer Jakab, published in the Wall Street Journal, August 25, 2015.
o Synopsis: Home builders are often seen as safe in this market because they benefit from delays and slowdowns in rate increases. The latest market fiasco likely means delayed rate hikes. But while the housing market is recovering, it’s hardly spinning out of control. Though there is still pent-up demand from the construction slump, prices are still 14% below their 2006 highs and the homeownership rate is at a 48-year low.
Sounds like it’s safe to say that we’re not returning to an overheated, messy market.
• Housing Shares offer a Ray of Hope. Written by Saumya Vaishampayan and Dan Strumpf, published by the Wall Street Journal, August 24, 2015.
o Synopsis: The Homebuilders Exchange-Traded Fund, which tracks everything from homebuilders to mattress-makers, is up 9.2% YTD. Sentiment among homebuilders is at its highest level in nearly a decade. Easier lending rules and continued labor market improvement are making buyers more comfortable taking on [mortgage] debt. Among related businesses, Home Depot stock is up 11%.
Other businesses are benefiting too. While disguised as an article, a large half-page ad touted investing in housing-related franchises.
• Fresh Opportunities in the Housing Boom. This advertisement Wall Street Journal’s print edition on August 24, 2015. See page B6.
o Synopsis: ProSource Wholesale sells remodeling and construction products to contractors and designers. Epcon Communities Franchising franchises the idea of building active adult condominium communities. Crowning Touch Senior Moving Services specializes in senior citizen relocation. They help seniors determine what will fit into their new (often smaller) homes, run an auction house and consignment shops to sell excess goods, and will sell existing homes in as-is condition.
I’m not a stock broker or investment adviser. You should research anything before investing, and never invest in what you don’t fully understand. But based on what I’m seeing, I’m looking at investing in housing stocks and housing stock. By stock, I’m talking about investing in existing homes on the market!
The financial press notes that the housing market elevator is rising. If it’s time for you to get on, please drop me a line or give a call. I’ll be happy to help.