Shoppers were glued to their phones on Black Friday, and that’s likely to present fresh logistical challenges for retailers. Online orders made up a quarter of consumer spending the Friday after Thanksgiving, up from 18% last year, the WSJ’s Suzanne Kapner writes. More than one-third of online sales on Black Friday were made on mobile devices, also up from 2015, helping drive overall sales up 9% year-on-year. The ongoing shift to mobile shopping is confounding brick-and-mortar retailers that hoped doorbuster deals and improved in-store experiences would lure more foot traffic. Companies that successfully wooed shoppers to their websites face a different test: how to ensure swift delivery of a record number of packages to customers’ doorsteps.
U.S. Home Prices Recover Ground Lost During Bust Home prices set a record in September, bringing to a close the worst period for the housing market since the Great Depression and stoking optimism for a more sustainable expansion.
(…) The average home price for September was 0.1% above the July 2006 peak, according to the S&P CoreLogic Case-Shiller U.S. National Home Price index released Tuesday. As of the previous month’s reading of the Case-Shiller index, a widely used benchmark for U.S. housing, prices remained 0.1% below the July 2006 record.
Adjusted for inflation, the index still is about 16% below the 2006 high. Home prices jumped 5.5% over the past year. (…)
While prices have recovered, the market is flashing caution signs. The country is building far fewer homes than normal, the homeownership rate is near a five-decade low, and mortgages remain difficult to come by, especially for less-affluent buyers. Rising mortgage rates could also begin to pose headwinds to further price growth.
Home-price growth has also outpaced income gains, making it more likely that the current rate of appreciation is unsustainable. Home prices have grown at an inflation-adjusted annual rate of 5.9% since 2012, while incomes have grown by just 1.3%, according to Case-Shiller. (…)
About 12% of homeowners who have a mortgage now owe more than their home is worth, down from more than 30% at the bottom of the market, according to Zillow. (…)
The problem with real estate averages is that there is no such thing as an average homeowner since real estate is inherently local. Mark Hanson, a housing specialist, highlighted this in a recent post in which he argues that we are, once more, in a housing bubble, worst than the last one:
- Ask Yourself: If 2005-07 was the peak of the largest housing bubble in history with “affordability” never better vis a’ vis exotic loans; easy availability of credit; unemployment in the 4%’s; the total workforce at record highs; and growing wages, then what do you call “now” with house prices at or above 2006 levels; high unaffordability; tighter credit; higher unemployment; a weak total workforce; and shrinking (at best) wages?
- Logical Answer: Whatever you call it, it’s a greater thing than the Bubble 1.0 peak.
The mind-numbing Case-Shiller regional charts below are presented without too much comment. The visual says it all:
Back to the WSJ article:
The housing recovery since 2012 has been uneven, often disproportionately benefiting wealthier homeowners and those in some of the largest cities. Such markets are the focus of the Case-Shiller study. Zillow’s home-price index, which covers a wider range of markets, is still 2.7% below the peak.
Median home values in urban areas across the U.S. were just 0.6% below the previous peak as of the end of 2015, while median home values in rural areas were nearly 6% below the peak, and those in suburban areas were nearly 7% below the peak, according to Zillow. (…)
Just 34 of the largest 100 metropolitan areas have seen starter-home prices recover to their previous peak, while 56 areas have seen high-end homes reach or surpass previous highs, according to home-tracker Trulia. (…)
Higher Rates Don’t Mean Lower House Prices After All With home values recovering, now comes the hard part: sustaining prices in a period of rising rates.
(…) While mortgage rates are up, they remain very low by historical standards. And rising rates during prosperous economic times don’t necessarily mean home prices have to fall.
A study by John Burns Real Estate Consulting Inc. examined 10 instances over the past four decades in which mortgage rates rose by at least 1 percentage point. It found prices weren’t especially sensitive to rising rates, particularly in the presence of other positive economic factors, such as strong job growth, rising wages and improving consumer confidence. (…)
Even if rates rise further, it isn’t last call yet for the house party.
If you intend to join this party, read Mark Hanson’s closing argument:
A rate surge of this magnitude over such a short time period – combined with a decel in rents in many core markets — is a serious blow to all segments of resi housing. It guaranties a sudden period of decreased activity – amplified due to slow Holiday and Winter seasons — and swifter assimilation (price decreases) to the lower purchasing power.
An A-grade credit with 20% down and $52,500 qualifying income can now only buy a $274k house vs a $302k house a month ago, or a 9% decrease. This is a huge headwind to national house prices, especially in the middle price bands, which have driven sales in 2016.
Mark has this great chart to illustrate the hurdle housing now faces if rates don’t back off:
Auto Loans Get Even Dicier Record numbers of shoppers are trading in cars while still underwater on their loans
(…) The latest stress signal comes from auto research firm Edmunds.com, which said in a recent report that record numbers of shoppers are trading in old cars for new ones when they still have substantial amounts due on their existing car loans.
In the first three quarters of 2016, the number of these new-car purchases with negative equity on previous loans reached a record 32% of all trade-ins, according to Edmunds data. That is up from 30% in the same period a year earlier and just 22% five years ago. The average amount of negative equity also reached a record, at $4,832.
That is significant when one considers that the average selling price for a new car is around $33,000, says Edmunds analyst Ivan Drury.
As a result, many borrowers are rolling over their balances into new loans, pushing loan-to-value ratios above 100%. They have to pay that back over time, either through higher monthly payments or a longer payback period. Already, payback periods have risen to an average of 69 months, from 63 months five years ago, according to Edmunds. (…)
We also know that Americans have been “trading up”, switching their old small car for their dream SUV amid low gas prices…
Oil Soars on OPEC Deal Optimism Crude futures surged more than 6% on growing optimism that OPEC would be able to deliver a production-cut deal, after Iran’s oil minister sounded a positive note on the prospects of an agreement.
Prices jumped after Iran’s oil minister, Bijan Zanganeh, said in Vienna that he believed the Organization of the Petroleum Exporting Countries would reach a deal, though he said an immediate freeze of his country’s output wasn’t on the agenda. (…)
“I have good expectations for the meeting, ”Iranian oil minister Bijan Zanganeh said, nodding when asked if proposals circulated on Tuesday night were acceptable to his country. (…)
U.S. to Forgive at Least $108 Billion in Student Debt in Coming Years The federal government is on track to forgive at least $108 billion in U.S. student debt in coming years, in a report that shows the Obama administration’s approach is proving far more costly than previously thought.
(…) Enrollment in the plans has more than tripled in the past three years to 5.3 million borrowers as of June, or 24% of all former students who borrowed directly from the government and are now required to be making payments. They collectively owe $355 billion.
The GAO estimates that $137 billion of that figure won’t be repaid. Most of it—$108 billion—will be forgiven because of borrowers fulfilling their obligations under income-driven repayment plans. The $108 billion only covers loans made through the current school year, however. The overall sum could continue to grow alongside enrollment increase. (…)
Carrier Corp. has agreed to keep in Indiana roughly half of the 2,100 jobs it had planned to shift to Mexico, after a lobbying effort from the incoming Trump administration.
In exchange for keeping about 1,000 jobs in Indiana, the company will receive new government incentives, said a person familiar with the matter. The terms of the agreement couldn’t immediately be learned. (…)
Eurozone Inflation Rate Highest Since April 2014 The eurozone’s annual rate of inflation rose to its highest level since early 2014 during November, but remained far short of the European Central Bank’s target.
The European Union’s statistics agency Wednesday said consumer prices in the eurozone were 0.6% higher in November than a year earlier, a pickup in the annual rate of inflation from 0.5% in October and its highest level since April 2014. (…)
The core rate of inflation—which excludes prices of energy, food and tobacco—tells a different story. It has been stuck at 0.8% for four straight months, and at the same level as in June 2014. (…)
Core prices declined 0.2% MoM in November after rising 0.9% in the previous 3 months and +0.6% in the previous 2 months. Annualized core inflation: last 3 months: +1.6%, last 4 months: +2.1%.
Expectations are for much higher inflation…(The Daily Shot):
U.S. funds favor equities on hopes of fiscal stimulus: Reuters poll U.S. funds increased equity allocations to a 16-month high in November on expectations that fiscal stimulus from President-elect Donald Trump will boost stocks, a Reuters poll found.
The survey of 13 fund managers, conducted Nov 16-29, showed equity allocations in a model global portfolio rose to 52.8 percent from 51.3 percent, the highest since July 2015.(…)