U.S. New Home Sales Rise to Highest Level Since 2007 Sales of newly built homes jumped 12.4% in July to the highest level in since October 2007, a sign of solid momentum in the U.S. housing market.
Purchases of new single-family homes rose 12.4% in July from a month earlier to a seasonally adjusted annual rate of 654,000, the Commerce Department said Tuesday. That was the highest level since October 2007. (…)
Economists surveyed by The Wall Street Journal had expected home sales in July to slow to a pace of 580,000. Sales in June were revised down to a pace of 582,000 from an initially estimated 592,000.
Through the first seven months of the year, new home sales also rose 12.4%, compared with the same period in 2015. (…)
New-home sales in July were up 31.3% from a year earlier. The latest figure brings new-home sales back to the level recorded just before the recession began. (…) (Chart from Haver Analytics)
We are finally starting to see more new US homes sold in the $200-300k range (as opposed to $300k and above). (The Daily Shot)
The next chart shows new US homes for sale as a proportion of US population since 1963.
Oil falls on surprise build in U.S. crude stocks Oil prices fell on Wednesday on an unexpected increase in U.S. crude stocks that revived worries about the supply glut that has capped prices for the past two years.
UNINTENDED CONSEQUENCES
Soon coming to a company, a city, a state, a country near you:
Dallas police, fire pension board facing disaster
The Dallas Police and Fire Pension System is a billion dollars in the red, and the plan to bail the system out is already being called “unacceptable” by some.
The bailout plan, unveiled Thursday, is a proposal that police and fire employees knew was coming. But the fact is, the Dallas Police and Fire Pension System is actually closer to $2 billion in the hole.
If things keep going the way they are going, the pension fund will be broke by 2030. That’s why consultants unveiled the bailout plan, which one police veteran called so drastic he believes it will be voted down by rank-and-file.
The plan calls for dramatic reductions in cost-of-living adjustments and deferred retirement option plans, also known as the drop program.
What’s more, the City of Dallas would immediately have to contribute $600 million into the fund just to keep it solvent. (…)
The pension fund got into trouble after former administrators made millions of dollars in risky real estate investments. (…)
But there is a lot more than poor management as Zerohedge reports:
As we recently discussed at great length in a post entitled “Pension Duration Dilemma – Why Pension Funds Are Driving The Biggest Bond Bubble In History,” another issue is DPFP’s exposure to declining interest rates. Per the table below, a 1% reduction in the rate used to discount future liabilities would result in the net unfunded position of the plan increasing by $1.7BN.
And then, you have other pension funds, already aware of their critical funding position given low interest rates, which are trying to find ways and means to improve their position. Some don’t really seem to understand what they are doing:
Pension funds in Hawaii and South Carolina are plying an arcane options strategy called cash-secured put writing. In a typical trade, the investor sells a contract, known as a put, to someone who owns stocks and is willing to pay up for protection in case they decline. If, within a certain time, the shares fall below a given price, the investor buys the stocks at that price, or covers their lost value.
The upside for the pension funds, which are writing options on the S&P 500 index, is that they earn regular income. The strategy aims to work like a volatility dampener. If stocks fall, the income the funds have collected on the options contracts should help cushion any hit they take on the puts and their own separate stockholdings. The pension funds set aside some cash-like instruments such as Treasurys for the payouts, so they aren’t caught without money if the market goes against them. (…) (WSJ)
Low volatility and a rising market makes the strategy attractive, as long as equities are not significantly overvalued, or stay that way for a good while……