Existing Home Sales Fell 1.5% in September, Down 23.8% Over Last Year… The 30-year fixed-rate mortgage now costs more than 7%, over double what it was this time last year.
What it means— Existing-home sales last month fell to the lowest level since September 2012 (excluding the start of the pandemic), just as the real estate market began to climb out of the long slump that followed the Great Financial Crisis, but that’s where the similarities to a decade ago end. Unlike back then, we’re still dealing with an inventory shortage. The number of homes on the market shrank again in September, as potential sellers decided it was better to stay in their current digs with their very low mortgage rates than to move. At the current sales pace, the market has 3.2 months of supply, whereas a balanced market has a six-month supply. Homes are sitting on the market for just 19 days. While that’s longer than the 16 days it took to sell a home in August of this year or the 17 days it took to sell a home in September of last year, it’s still fast. The imbalance between the number of sellers and buyers can be seen in the median sale price, which fell only modestly from $389,500 to $384,800, or 1.2%, even though mortgage payments are marching higher. This illustrates that the housing shortage continues. It will take a dramatic economic fall to crack the residential real estate market.
September Housing Starts Down 7.7% Over Last Year… Single-family housing starts were down 18.5%.
What it means—Housing starts are notoriously noisy, which is why the 13.7% increase in housing starts last month didn’t deserve much weight. We’re looking for long-term trends, and so far this year, it looks like builders are trying to find a “Goldilocks” level of activity that will allow them to sell units at a profit while not flooding the market with inventory or starving buyers of options. We’ll get a better look at the new-home market next week with the report on new-home sales. The sales rate compared with inventory combined with the median new-home sales price will be telling.
Manheim’s Used Vehicle Value Index Down 10.4% Over Last Year… The nation’s largest used-car auction company reported that prices fell at the fastest pace since 2009.
What it means— As the component shortage eases, rising rates are putting a damper on car loans just as new-vehicle inventory is growing. Due to the confluence of events, used-car prices soared during the pandemic, with recent-year models often selling for more than their original purchase price. It’s doubtful that this will lead to a rout in used-car prices, because the component shortage left us several million units short in our national inventory, which, in turn, starves the used-car market of the models from the most recent years. Car makers won’t overproduce to make up the difference, because the shortage has boosted their selling price per vehicle. Remember that car manufacturers need that cash to fund their transition to EV models, which they sell at either a loss or at a very slight profit.
Biden Administration Releases Last of the 180 Million Barrels of Oil From Strategic Petroleum Reserve (SPR) Authorized Last Spring… The move brings the SPR inventory down to 400 million barrels, the lowest level in 40-years.
What it means— President Biden authorized the sale of oil from the SPR to combat higher prices as the world adjusted to sanctions on Russian oil sales. Oil prices fell over the summer as the U.S. reserves hit the market, but it’s debatable whether SPR sales were the driver.
Rising interest rates and inflation have been eating into consumer spending and, therefore, economic growth for months, curbing global demand for energy. It’s much more likely that lower current demand and falling estimates of future demand are responsible for lower oil prices vs. a temporary bump in supply. President Biden said he wants his team to be ready to release more oil from the SPR at a moment’s notice if prices jump. Unfortunately, that might pit the U.S. government, which controls a limited reserve meant to carry us through disasters and supply shortages, against an oil-producing cartel (OPEC+), which controls the marginal supply to the world. At the end of such a match-up, we’d be left with less oil in the SPR and higher prices, the worst of both worlds.
It’s Not Your Imagination, Mosquitoes Really Do Bite You More Than Others… New research shows that, due to their personal odors, some people are mosquito magnets, attracting the biting pests at much higher rates than other people. The researchers attribute it to the smell emitted by certain natural acids that we have on our skin. People who are mosquito magnets produced more of the acids than others, which made the biggest mosquito magnet about 100 times more attractive to mosquitoes than the person who attracted the fewest of the biting bugs. The research group repeated the study with the same subjects over several years and observed the same results, showing that mosquitos are drawn to the same smells over time. Unfortunately, you can’t get rid of the acids in the moisturizing layer of your skin without causing damage. If you’re a mosquito magnet today, you are likely to continue to attract them in the years to come.
Data supplied by HS Dent Research
“When the facts change, I change my mind.
What do you do?” ~ John Maynard Keynes
Our plan is “the plan will change.”
What is your plan?
Relative strength measures the price performance of a stock against a market average, a selected universe of stocks or a single alternative holding. Relative strength improves if it rises faster in an uptrend, or falls less in a downtrend. It is easily applied to individual positions in your portfolio and to sectors and asset classes.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Investor Resources, Inc. (“Investor Resources”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Investor Resources. Please remember to contact Investor Resources, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Investor Resources shall continue to rely on the accuracy of information that you have provided. Investor Resources is neither a law firm, nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of Investor Resources’ current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at https://www.investorresourcesinc.com/. Clients Please Note: Advise us if you have not been receiving account statements (at least quarterly) from Charles Schwab & Co.™