TRADEX GLOBAL INTERNAL COMMENTARY
New home sales surged 7.6% (a 369k annual rate), higher than
most economists’ estimates. Interest
rates are luring buyers and builders to move ahead (3.66% mortgage rates will
do the trick). The median sales price
increased 5.6% from the same month last year, the best performance in 5
years. Interestingly enough, the best
increase in purchases were in the Northeast (not in Greenwich). The Midwest dropped 11%, and a smaller 3.5%
drop was seen in the West. I think that the survey should add that if it were
broken down by zip code, it would show large bifurcations. The number of newly constructed homes on the
market is close to the record low of 144k (the peak of newly constructed homes
on the market was 572k in July 2006). I
guess if you believe that family formations have not changed much, one could
argue a small increase in jobs and lower unemployment could spark a “new home”
shortage. On a personal note, the older
houses I see for sale or foreclosure are really ugly and should probably be
razed!!! That inventory will probably
become the rental demand in the future and keep some upside pressure on prices
for the new modern inventory. I think
“new housing” will actually outperform the broader market which today feels
like 2008!!! We are hedging and will
continue to keep exposure to directional managers at lower levels. Keep nimble - Michael Beattie
EXTERNAL RESEARCH COMMENTARY
Demand for new U.S. homes rose more than forecast in May as mortgage
rates dropped, bolstering the residential real-estate market while other parts
of the world’s largest economy cool. Purchases climbed to a 369,000 annual
rate, the most since April 2010 and up 7.6 percent from the prior month, the
Commerce Department reported today in Washington. The median estimate in a
Bloomberg News survey of 67 economists was 347,000. The number of houses on the
market held near a record low. Falling borrowing costs may keep luring buyers
to builders like Toll Brothers Inc. (TOL), even as a cooling job market and
limited access to credit restrain the recovery. The Federal Reserve last week
extended a program to keep long-term interest rates low in a bid to reduce unemployment,
sustain housing and prevent a global slowdown from stalling the expansion.
“It’s another sign of life in the housing sector,” said Brian Jones, a senior
U.S. economist for Societe Generale SA in New York, who forecast a gain to
362,000. “It’s consistent with a gradual improvement in activity, but we’ve got
miles to go before we get back to normal.” Stocks dropped amid concern that a
meeting of European leaders later this week will fail to help contain the
region’s debt crisis. The Standard & Poor’s 500 Index dropped 1.9 percent
to 1,310.11 at 12:08 p.m. in New York. The yield on the benchmark 10-year
Treasury note fell to 1.61 percent from 1.68 percent late on June 22.
Elsewhere, the Basel, Switzerland-based Bank for International Settlements said
in its annual report published yesterday that central banks in developed
nations are confronting the limits of their ability to aid economic recovery as
government efforts to strengthen finances fall short.
Tradex Global Advisory Services, LLC
investorrelations@thetradexgroup.com
203-863-1500
@Tradex_Global
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