Edge and Odds

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It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so (Mark Twain)

Edge and Odds

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NEW$ & VIEW$ (23 JUNE 2015): Housing!

Existing-Home Sales Rose 5.1% in May

The pace of existing-home sales rose 5.1% last month from April to a seasonally adjusted rate of 5.35 million, the National Association of Realtors said Monday. Sales for April were revised up to 5.09 million from an initially reported 5.04 million.

First-time buyers rose to 32% of all existing-home buyers from 27% a year ago, NAR said. Historically, first-time buyers have made up about 40% of the market.

Bill Banfield, vice president at Quicken Loans, said the lender has seen a significant uptick in inquiries from first-time homebuyers. While saving for a down payment continues to be a struggle for younger buyers, he pointed to loans backed by the Department of Veterans Affairs and Federal Housing Administration that require less cash up front. (…)

Total housing inventory at the end of May increased 3.2% to 2.29 million existing homes available for sale. (Charts from Doug Short and CalculatedRisk)

Existing Home Sales Growth

FYI, existing house sales are up 9.2% YoY and prices are up nearly 8%!

BMO Capital Markets adds:

Spurred on by new jobs, firmer wages and easing loan standards, first-time buyers drove a 5.1% increase in existing home sales to 5½-year highs in May. They raised their share of total sales to a 2½ -year high of 32%, though this is still well below longer-term norms above 40%. Good affordability suggests this share will likely increase, barring a sharp jump in interest rates. The typical first time buyer required just 21% of gross family income to service a mortgage in Q1, well below the three-decade norm of 29%. In fact, this percentage is no higher than five years ago, as a 9% advance in income and one percentage point drop in mortgage rates have fully offset a 24% rise in home prices.

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Beijing cheerleaders buoy China markets Moves to calm investor sentiment after rout give bourses a lift

The Shanghai Composite finished Tuesday with a 2.2 per cent gain — its best day since June 1 — after sinking as much as 4.7 per cent in morning trading. The Shenzhen market added 1.2 per cent, having also dropped sharply earlier in the day.

The 13.3 per cent decline in the Shanghai Composite last week spurred a flurry of front-page commentaries in China’s state-backed papers that encouraged the retail-dominated market not to panic.

“Volatility is a normal status of capital markets and all participants should be aware of this fact,” the official Securities Times wrote on Tuesday. “After a reasonable analysis of the current market environment, we find the bullish market logic has not changed yet.” (…)

What is that bullish logic, please?

China’s Small-Cap Stocks That Led Rally Set to Enter Bear Market

The ChiNext index of smaller companies in Shenzhen was poised to enter a bear market amid concern investors were unwinding margin bets in China’s most expensive stocks.

The 100-member gauge slid as much as 4.8 percent Tuesday, extending its loss from its June 3 peak to more than 20 percent. The index, which is dominated by technology shares, pared declines to 2.5 percent at the 11:30 a.m. local-time break.

The ChiNext traded at a record 131 times reported earnings this month, five times the level of the Shanghai Composite Index, after the small-cap gauge tripled in just 12 months.

EUROZONE FLASH PMI AT 54.1, FOUR-YEAR HIGH

Eurozone economic growth hit a four-year high in June, according to the latest PMI® survey data. Markit’s flash Eurozone PMI, based on around 85% of usual monthly survey replies, rose from 53.6 in May to 54.1 in June, its highest since May 2011.

The upturn in June also took the average PMI reading for the second quarter as a whole to the highest for four years.

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Growth picked up speed in both services and manufacturing at the end of the second quarter. The improved performance rounded off the best quarter for four years in the service sector while factories enjoyed their best quarter of production growth for a year, highlighting the broad-based nature of the upturn.

The survey also indicated that employment and new orders had likewise risen at the strongest rates for four years over the second quarter as a whole, although growth slowed in both cases in June. In the case of new orders, growth has now slowed for three successive months, easing in both services and manufacturing, with the latter also recording a slowdown in growth of exports.

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Expectations of future growth in the service sector also slipped, dropping to a six-month low.

Slower order book growth and reduced optimism about the year ahead were largely attributable to an increase in the number of companies citing growing uncertainty regarding the impact of the current Greek debt crisis.

Companies’ average input costs rose at a weaker rate than May’s three-year high, but continued to grow on the back of higher oil prices and wage bills, as well as rising import costs resulting from the euro’s depreciation.

Average selling prices for goods and services continued to fall, but the decline was once again only marginal and one of the smallest seen over the past three years.

By country, growth accelerated in both Germany and France, although the former saw a weaker rate of expansion over the second quarter as a whole compared with the first quarter.

France saw weaker growth than Germany, but the PMI nevertheless hit its highest since August 2011, ending the best quarter that France has seen since the third quarter of 2011. New order growth also accelerated in France to reach the fastest since August 2011 and employment increased for a fourth successive month, with the rate of job creation the second-highest since December 2011.

Elsewhere in the region, growth slowed for a second successive month, but still outpaced that seen in both France and Germany. Over the second quarter as a whole, the region excluding France and Germany enjoyed its best performance for eight years. Growth of new orders and employment likewise slowed in June outside of the two ‘core’ euro nations, but encouragingly the overall rise in employment during the second quarter was still the best seen since the third quarter of 2007.

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