Dow went up 52, advancers over decliners 4-3 & NAZ slid back 3. The MLP index added 1+ to 179 & the REIT index was even in the 465s. Junk bond funds did little & Treasuries were weak on profit taking. Oil jumped 2+ to 73 & gold dropped 11 to 1795.
AMJ (Alerian MLP index tracking fund)
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Soaring aluminum prices are the latest worry for a construction industry that has been grappling with higher materials & labor costs as the US economy emerges from the pandemic The 3-month offer price for aluminum traded at the London Metal Exchange has surged 47% this year to $2907 per tonne. Prices are up 73% from their pre-pandemic levels. "Aluminum is integral to residential construction and used to make everything from siding and gutters to insulation, nails, and HVAC equipment," said National Association of Home Builders CEO Jerry Howard. Aluminum is also used in roofing, fencing & many other products. Higher aluminum prices have "translated into higher material costs for builders as the price of building materials made with aluminum has increased 15-25% over that period," he added. Higher aluminum costs aren’t the only headache for homebuilders. Lumber prices earlier this year had climbed by as much as 316% since the start of 2020, adding $36K to the cost of building an average-sized new home. Other essential materials including iron, copper, steel & natural gas have also seen their prices skyrocket. Builders & contractors are also dealing with higher transportation & labor costs. In addition, there aren’t enough roofers, glaziers, plumbers, electricians & other types of workers to fill the needs of the construction industry. The drop in confidence mirrors a decline in homebuilder sentiment that was reported last month. The National Association of Homebuilders'/Wells Fargo Housing Market Index fell 5 points in Aug to 75, the lowest since Jul 2020.
Aluminum prices soar in new construction headache
Pres Biden campaigned on a promise to raise taxes on the very richest Americans, unfurling just months after he was elected one of the biggest tax hikes in decades to help fund his $4 T economic agenda. As part of his sweeping "Build Back Better" agenda, Biden called for a slew of new taxes on corps & the top sliver of US households, including raising the corp tax to 28%, nearly doubling the capital gains tax rate to 39.6% from 21%, restoring the top individual income tax rate to 39.6% from 37% & taxing capital gains at death. "My fellow Americans, trickle-down economics has never worked," the pres said in Apr during his first primetime address before a joint session of Congress. "It’s time to grow the economy from the bottom up and middle out." But on Mon, House Dems released a blueprint to fund the $3.5T climate & family plan that watered down some of the most ambitious elements of Biden's original tax plan. Under the outline from the House Ways & Means Committee, the corp tax rate would be diluted to 26.5% — & would only apply to businesses earning more than $5M in taxable income. The tax rate would actually decline to 18% for small businesses earning less than $400K; all other businesses would continue to pay the current rate of 21%. And although the measure includes a 3% surcharge on incomes exceeding $5M, it completely excludes Biden's move to end the "step-up in basis," which allows heirs to inherit assets while paying minimal capital-gains taxes (based only on the time they receive the asset and the time they sold it, allowing them to reduce the tax bite).
Biden's extreme tax-the-rich plan diluted by divided Democrats
Fall is usually the start of the slower season for the housing market, but nothing is usual in today's pandemic-driven housing market. Potential homebuyers are seeing a slight rise in inventory & consequently rushing back into the fray. Mortgage applications to purchase a home jumped 7% last week from the previous week, seasonally adjusted, according to the Mortgage Bankers Association (MBA). An additional adjustment was made to account for the Labor Day holiday. That is the highest level since Apr of this year. These applications were still 11% lower than the same week one year ago, but that was the smallest annual decline in 14 weeks. Buyers have been hamstrung by the meager supply of homes for sale, but that supply has been rising lately, albeit slowly. The number of new listings rose for 9 straight weeks during the summer, but finally fell again last week, according to a Realtor.com report. “Even with the recent new listings slip, the gap with pre-COVID levels has shrunk significantly as more new sellers have entered the market so far in 2021 than last year,” according to the report. Home prices continue to gain at a record pace & that was also reflected in the purchase mortgage applications. “Both conventional and government purchase applications increased, and the average loan size for a purchase application rose to $396,800. The very competitive purchase market continues to put upward pressure on sales prices,” said Joel Kan, an MBA economist. Applications to refinance a home loan fell 3% for the week & were also 3% lower than the same week one year ago. Borrowers have not had a lot of incentive to refinance, as mortgage rates have barely budged in the last month & rates are now higher than they were at the start of the year. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548K or less) remained unchanged at 3.03%, with points decreasing to 0.32 from 0.33 (including the origination fee) for loans with a 20% down payment.
Mortgage demand from homebuyers jumps after new listings rise all summer
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