As the COVID-19 spreads and the patient count and death toll grow, economists are slashing their once-rosy expectations for global growth in 2020.
But amid the anxiety, there’s one bright spot in the U.S. that is likely to be immune from the virus fallout. Analysts say the housing market isn’t just domestic in nature. It will also be buoyed by exceptionally cheap borrowing costs, years of pent-up demand, and a residential construction sector that may have finally figured out how to efficiently produce entry-level properties.
“Year after year, through things like the Greek debt crisis I had a theory that home buyers were going to be spooked, and they just shrugged off the news,” said Glenn Kelman, CEO of home brokerage Redfin
“The past few years have made a fool out of anyone predicting higher rates and challenging American exceptionalism. The U.S. economy just keeps on going strong.”
‘The past few years have made a fool out of anyone predicting higher rates and challenging American exceptionalism. The U.S. economy just keeps on going strong.’
Just how ferocious is demand in the housing market?
On his first-quarter earnings call last week, Kelman had this to say: “A Redfin agent just told us about a bidding war with 30 other buyers in a far-flung area outside of Portland, Ore., this month. The property being fought over was a mobile home. This situation can last longer than most realize, as the law of supply and demand works slowly in real estate.”
That is helping to extend what has long been a seasonal business, Kelman told MarketWatch. Anxious buyers are pushing the “spring selling season” earlier and earlier. Investors may start to get a read on that activity this week, which will bring the first housing economic releases of 2020.
On Wednesday, the Commerce Department will report the number of new homes started and permits applied for in January. On Friday, the National Association of Realtors will release data on January sales of previously-owned homes, which make up about 90% of the market.
Kelman isn’t the only observer who expects big things from housing this year. “It will be a tailwind” for the broader U.S. economy, said Mark Zandi, chief economist for Moody’s Analytics.
For Zandi, the state of housing comes down to financing costs. “If we have a 30-year fixed-rate mortgage at 4% or below, we should have a solid market,” he said. “If we have 3.5%, we have rip-roaring growth. North of 4%, the market will fade.”
which was the average in the most recent week, is the sweet spot for the mortgage market, Zandi said.
Kelman said that similar to other exogenous events that manage to at least momentarily surprise markets and keep yields in check, the outbreak of coronavirus may have the unintended consequence of keeping borrowing costs low.
“The coronavirus is sort of a dark irony helping out housing,” Zandi told MarketWatch. “It’s keeping rates down as global investors come piling into the U.S. but it’s not hurting our economy to the point where it’s costing us jobs,” he said.
Zandi and others emphasize that it’s still too soon to know anything about the true impact of the infectious disease, but as Kelman put it, the housing market won’t turn down on a dime. “Do I see any storm clouds on the horizon? I don’t. But is it going to rain? I know it will,” he told MarketWatch.
And for now, Americans may be mostly oblivious about the angst swirling through financial markets. On Friday, a closely watched measure of consumer confidence roared past economist expectations to match a near-15-year high. Only 7% of survey respondents mentioned the coronavirus in early February. It’s too early to know whether that means Americans aren’t very aware of the situation – or that they are brushing it off.
Still, as Kelman put it, the decision to buy a home is the most “macro-sensitive” purchase there is. Americans can put off clothing purchases or dine in rather than visit restaurants, but they know once they buy a home, they are making a 30-year commitment — and yet are still out in force touring open houses.
Builders may also finally start to make a solid contribution to economic growth: Zandi thinks this could be the first year in a decade in which analysts underestimate the pace of residential construction rather than overestimate it. It’s taken a while, but builders have finally figured out how to make their costs pencil out at lower home purchase points, Zandi noted.
Homeowners are also renovating and redecorating. In the government’s January retail sales data, one of the bright spots was home centers: stores like Home Depot Inc.
Meanwhile, markets closed mixed on Friday, but ended solidly higher for the week, with the Dow advancing 1%, the S&P 500 1.6%, and the Nasdaq 2.2% for the week.
In any case, housing activity has thus far served as a pillar in the economy in its 11th year of expansion, while other areas, like production and corporate investments, have languished, market segments that are likely to remain under pressure as China suffers from COVID-19.
Next week, may help to determine whether that trend holds up.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
