Dow was off 61, decliners over advancers almost 3-1 & NAZ added 57. The MLP index retreated 2+ to the 224s & the REIT index sank 7 to the 359s on rising interest rates. Junk bond funds were mixed & Treasuries saw more selling which raised yields (more below). Oil fell almost 2, but held above 70, & gold dropped 18 to 1926.
AMJ (Alerian MLP Index tracking fund)
Sales of previously owned homes were essentially flat in May compared with Apr, according to the National Association of Realtors (NAR). They rose 0.2% to a seasonally adjusted, annualized pace of 4.3M units. Compared with a year earlier, however, sales were 20.4% lower. The slow spring sales pace is a combination of still-high prices, elevated mortgage rates & a critical shortage of homes for sale. There were just 1.08M homes on the market at the end of May. That's 6.1% lower than the supply in May of last year. At the current sales pace that represents a 3-month supply. 6 months is considered a balanced market. Before the Covid pandemic hit, there were nearly twice as many homes on the market. “Newly constructed homes are selling at a pace reminiscent of pre-pandemic times because of abundant inventory in that sector,” Lawrence Yun, chief economist for the NAR, said. “However, existing-home sales activity is down sizably due to the current supply being roughly half the level of 2019.” May sales are based on closings, homes that likely went under contract in Mar & Apr. Mortgage rates were choppy during that period. The average contract interest rate on the popular 30-year fixed mortgage started Mar over 7%, then dropped sharply close to 6% briefly before then heading higher again, spending most of Apr around 6.5%. Strong demand has kept a floor under home prices, which would normally drop more given the slow sales pace. The median price of an existing home sold in May was $396K, which is 3.1% lower than May 2022. Prices rose in the Northeast & Midwest but fell in the South & West. This is the largest price drop in just over a decade, but it is a median measure, which skews the price toward the type of home that is selling the most. The pull between strong demand and& tight supply is keeping the market competitive. Nearly 1/3 of properties sold above list price. Properties remained on the market for 18 days in May, down from 22 days in Apr but up from 16 days in May 2022. Nearly ¾ of the homes sold in May were on the market for less than a month.
Home sales barely budge from April to May in sluggish spring market
Growing demand & the lack of supply have driven prices for used cars
up with little relief in sight, according to a recent report. Used car prices have softened recently but remain significantly
higher than before the COVID-19 pandemic, according to a new Edmunds report.
Prices on average for used cars dropped 6.4% in Q1-
2023 year-over-year, but they remained 44% higher than 5 years ago. Part
of why prices for used cars have soared is because supply can't meet
demand. Drivers struggling with high inflation & interest rates seek
relief in the used car market. However, the usual spigot for used car
inventory – lease returns, trade-ins & daily rentals – remains
constrained. Lease volumes decreased to 559K vehicles in Q1 of this year from 1M cars 5 years ago,
according to Edmunds. Similarly, trade-in volume dipped to 5.5M
cars in 2022 from 6.2M vehicles in 2018. Off-rental vehicles,
typically the most significant contributor to used car supply, are now
much older & pricier. "The good news is that used prices have
softened enough in Q1 to offer some relief for consumers getting pushed
out of the new market," Edmunds Director of Insights Ivan Drury. "The
not-so-good news is that the used vehicle market continues to be
challenging for car shoppers since there are fewer vehicles available
and demand is keeping prices historically high." Used vehicles priced under $20K are harder for shoppers to find,
according to Edmunds. The share of used cars sold under $20K was
30.6% in Q1 of 2023 compared to 60.5% 5 years ago. In
the new vehicle market, the share of vehicles sold for under $20K was
less than 1%. Over the last decade, the shift to higher-end luxury vehicles,
driven by a low-interest rate environment & extended financing loan
terms, has meant that economy cars are less readily available. "Consumers
returning to the used market for the first time in years might find
conditions a bit shocking. Not long ago, $20,000 was seen as an
acceptable amount to spend on a used car to get an optimal blend of
miles and age," Drury said. "In today's market, $20,000 puts consumers
into a much older or much higher-mileage vehicle."
Used car prices soar as demand for limited inventory grows, report says
Treasury yields were slightly higher as investors assessed what could be ahead for interest rates & digested remarks from Federal Reserve Chair Jerome Powell. The yield on the 10-year Treasury was trading about 3 basis points higher at 3.752% & the yield on the 2-year Treasury was up by 4 basis points to 4.748%. Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%. Investors considered the path ahead for Fed monetary policy after Powell said yesday that further interest rate hikes are likely as inflation remains too high. His comments echoed the guidance issued by the central bank after its most recent policy meeting last week. Powell said yesterday that progress toward these goals has been made, but “the process of getting inflation back down to 2% has a long way to go.” Elsewhere, the Bank of England announced a surprise 50 basis point rate hike, which is its 13th increase in a row. The decision follows a higher than expected inflation reading of 8.7% for May, which was published yesterday.
Treasury yields rise as investors consider interest rate outlook
Dow Jones Industrials
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