Opportunity To Get Ahead Of The Curve?

At the end of March, interest rates now sit at 6.32% average across the country for a 30-year fixed rate mortgage. While this is lower than a few weeks ago, they are still much higher than a year ago.

The cause is that the Federal Reserve has been raising rates aggressively over the last year to fight persistently high inflation. The Fed's goal of raising rates is to slow the economy and bring inflation back down to a normalized level or target goal of 2%.

Raising rates makes large capital expenditures for businesses or individual households more expensive, thus creating a situation where it is no longer affordable or makes good business sense to make those investments.

Fewer large investments or fewer new homes being built because the financing costs of making those purchases are too high will eventually slow the economy and thus bring inflation down.

While we all want inflation to come down quickly, it takes time for high-interest rates to flow through the system and change business leaders' and households' decision-making.

Furthermore, there is a rather big delay with the economic data that tells us how the economy is performing and whether or not large investments, home purchases, and overall spending is slowing.

This all means that when we realize business leaders-consumers have changed their minds about what investments and purchases are worth making, the economy is already slipping.

If we now look strictly at the household side of the equation, it seems clear that this group is heading toward tough times in the not-so-distant future, thus making the idea of a new home purchase much less likely.

First, we have high inflation. This is making everything across the board more expensive. Consumers' average cost of living is increasing, whether it be groceries, child care, transportation, or clothing. Continue reading "Opportunity To Get Ahead Of The Curve?"

Housing Is A Booming Industry During The Pandemic

When the pandemic hit home and the Federal and State governments ‘shut down’ the country and U.S. economy in March, some industries were predictably going to perform well. The ‘stay at home’ stocks and technology companies or the online and big-box retailers that had web presence where obvious smart plays during a time when social distancing and avoidance of large public places was going to be for the foreseeable future. However, due to government policies, primarily low-interest rates, the housing industry has also become a powerful economy sector.

In August, existing-home sales were up 10.5% year-over-year at a seasonally adjusted annual rate of 6 million units. In August, new home sales hit 1 million units, which represents a 43.2% increase compared to August of 2019. If current sales rates continue as they have been, unsold inventory is just three months of supply, which ties December of 2019 for the lowest level we have seen in the last 20 years.

In hindsight, it makes perfect sense, but during the stock market crash in March and the fact that for the most part, the vast majority of American’s were stuck at home, it was hard to predict that the housing industry would boom in the middle of a pandemic. However, that is exactly what has happened, and as I mentioned, looking back now, it is obvious why housing would boom at a time like this. People are stuck at home and realize how much they don’t like their home, or they were living in densely populated cities and want to move to the suburbs and have more space.

With the unknown of how much longer Covid-19 and the pandemic will disrupt life as we knew it, there are a few housing-related Exchange Traded Funds that you may want to consider owning as a way to catch a piece of the housing boom, without investing directly into real-estate yourself. Continue reading "Housing Is A Booming Industry During The Pandemic"

Housing Starts Down In September A Sign You Should Buy Housing Related ETF

Matt Thalman - INO.com Contributor - ETFs

Housing starts for September came in at 829,000 units, lower than the 851,000 units reported in August. Some economist and market participants are saying the weak housing starts are a sign the economy is beginning to show signs of wear.

Others have noted that 15.3% of the decline in starts came from parts of the country that were affected by hurricane Harvey and Irma. Furthermore, we can't forget about the wildfires in California, which may not be as impactful as the hurricane's, but still likely played some role in the decline.

Another data point that points to the health of the housing market is the National Association of Home Builders reported their Housing Market Index. In March of this year, the National Association of Home Builders reported their Housing Market Index hit a 71, just one point lower than its all-time high of 72 which was set in June of 2005. If you recall, shortly after June 2005 the housing bubble began to burst, and the housing crisis took down the U.S. economy. The NAHB report their Housing Market Index was at a 68 in October.

What is again interesting about these data point is that when the NAHB's Market Index hit its all-time high in 2005, the housing starts number was at 1.8 million.

Home builders have cited land and labor shortages for the 'low' number of housing starts. This could be a big problem for those looking to buy a home in the future because it could cause prices to skyrocket. But at the same time, that doesn’t mean the home builders will be making money hand over fist because remember their cost is going higher. Continue reading "Housing Starts Down In September A Sign You Should Buy Housing Related ETF"

Market May End The Year Where It Is Today, But You Can Still Make Money

Matt Thalman - INO.com Contributor - ETFs

A number of market participants have begun making year end predictions about where they believe stocks will finish. The predictions have the market finishing higher, lower, a lot higher, a lot lower, and right where it is today. Basically, no one really knows how the stock market will finish 2017 because no one can accurately predict the future.

But, when we look at the past, predictions have been made which aren’t as optimistic. Based on historical data a Goldman Sachs analyst has noted that when stock valuations have been where they are today, the market returns have been in single digits or negative.

Year-to-date the S&P 500 is already up 10.5%, which again compared to historical averages is an above average return. Furthermore, history tells us that we have market pull backs of 5%, 10%, and 15% rather often; about every 3 months, 8 months, and 14 months. We have not seen a 10% or 15% pullback in 2017. Continue reading "Market May End The Year Where It Is Today, But You Can Still Make Money"