Dow finished in daily trade down 29 (near session lows), advancers over decliners better than 3-2 & NAZ dropped 175 today. The MLP index was up 1+ to the 294s & the REIT index gained 3 to the 398s. Junk bond funds fluctuated & Treasuries had a little selling which took yields modestly higher. Oil rose fractionally to the high 71s (but still in its sideways trading zone) & gold finished the year up 22 to 2640.
Dow Jones Industrials
There’s good news in the housing market to close out 2024: there's a lot more supply. The bad news: a lot of that supply is stale, sitting unsold for much longer than usual. Active listings in Nov were 12.1% higher than they were in Nov 2023 & hit the highest level since 2020, according to a new report from Redfin. More than ½ of those homes (54.5%), however, had sat on the market for at least 60 days without going under a contract of sale. That's the highest share for any Nov since 2019 & is up nearly 50% from the year before. The typical home that did go under contract did so in 43 days, the slowest Nov pace since 2019. “A lot of listings on the market are either stale or uninhabitable. There’s a lot of inventory, but it doesn’t feel like enough,” said Redfin agent Meme Loggins, who was quoted in the report. “I explain to sellers that their house will sit on the market if it’s not fairly priced. Homes that are priced well and in good condition are flying off the market in three to five days, but homes that are overpriced can sit for over three months.” Mortgage rates shot over 7% in Oct & have mostly stayed there thru the end of the year, according to Mortgage News Daily. Home prices also continue to rise. The latest monthly price report from S&P CoreLogic Case-Shiller showed prices nationally up 3.6% in Oct compared with the same month a year earlier. “With the latest data covering the period prior to the election, our national index has shown continued improvement,” said Brian Luke, head of commodities, real & digital assets at S&P Dow Jones Indices. “Removing the political uncertainly risk has led to an equity market rally; it will be telling should the similar sentiment occur among homeowners.” Pending home sales, which is a measure of signed contracts to purchase existing homes, rose in November both monthly & annually to the highest level in nearly 2 years, according to the National Association of Realtors (NAR). They were, however, coming off a very slow base. The Realtors claim interest rates are now at a new normal. “Consumers appeared to have recalibrated expectations regarding mortgage rates and are taking advantage of more available inventory,” said Lawrence Yun, NAR's chief economist. “Mortgage rates have averaged above 6% for the past 24 months. Buyers are no longer waiting for or expecting mortgage rates to fall substantially. Furthermore, buyers are in a better position to negotiate as the market shifts away from a seller’s market.” The slower selling pace, however, doesn't bode well for the new year, especially with interest rates remaining elevated. There is still demand, but renters are remaining renters longer, according to another Redfin report, due not only to higher home prices but higher prices for brokers & movers.
The housing market is heading into 2025 with a worrying supply trend
Despite high borrowing costs, home prices in major US cities continued to climb in 2024, except for a handful of metros in Texas & Florida, where prices bucked the trend and declined. Out of the largest 50 metros, only 4 major cities recorded year-over-year price declines as of Nov 2024, according to listings data from the online broker Redfin. A look at which cities had price drops & shows how much they fell, based on the change in median home prices.
- Austin, Texas: -3.7%
- Tampa, Florida: -3.5%
- San Antonio, Texas: -3.0%
- Fort Lauderdale, Florida: -1.6%
With the steepest drop in home prices, Austin, Texas, has become a leading example of pandemic boomtowns facing a sharp reversal. After home prices soared to a peak of $667K in 2022, they have since dropped to $548K, according to Redfin's latest data. While still higher than the national median of $430K, the drop marks a significant shift from the city's pandemic-era growth. From 2020 to 2022, Americans flocked to warmer climates and more affordable cities like Austin, driving up demand for housing in Texas & Florida. This surge in interest coincided with a construction boom, bringing housing supply back to pre-pandemic levels in both states. Now, with migration slowing & new homes entering the market, major cities in Texas & Florida are seeing slower price growth compared to the national average. While some cities in these states posted price declines, others, such as Orlando & West Palm Beach in Florida, along with Fort Worth in Texas, recorded only modest gains of under 2%, far below the national average of 5.4%. Rising levels of “stale inventory” — homes sitting on the market for over 60 days are weighing on prices. In Nov, more than 60% of listings in Austin, Fort Lauderdale & San Antonio remained unsold for two months or longer, among the highest shares in the country. Florida's housing market faces other challenges as well. Natural disasters & rising construction costs are driving up insurance premiums, while surging HOA fees are also making homes increasingly unaffordable for buyers. These metros stand in contrast to much of the country, where tight inventory is expected to push home prices higher.
Home prices rose in major U.S. cities last year—except these 4 in Texas and Florida
For all the exuberance about Tesla (TSLA) benefiting from Donald Trump's return to the White House, trader's aren't so sure the carmaker can avoid its first annual sales decline in
over a decade. Analysts are estimating the
company may deliver around 510K vehicles in the final 3 months of
the year. That would set a new quarterly record for TSLA, but the
company would need to sell about 4600 more cars to make good on its
forecast for slight growth in 2024. TSLA has a lot riding on the production & delivery figures it's expected to report on Jan 2. While investors have been betting
Musk's emergence as the marquee donor to President-elect Trump will pay
dividends for his companies, an annual sales dip could lead to some 2nd-guessing. Trump's policy prescriptions
are far from a slam dunk for TSLA. While a federal
framework for autonomous vehicle deployment is cause for optimism, it's
not clear the company’s technology is ready. Trump's advisers also are
recommending that he repeal electric-vehicle subsidies & roll back
fuel-economy & tailpipe-pollution regulations that generate
significant revenue for TSLA. Musk has maintained throughout the year that TSLA
is between 2 “growth waves” & repeatedly predicted that autonomy
will lead to a next leg of expansion. The first touched off when the
company began rolling out its most affordable EV, the Model 3 sedan &
followed that up with the smash-hit Model Y sport utility vehicle. Whether
TSLA manages to eke out any growth or not in 2024, the company lost
significant momentum in the midst of a broader slowdown in the global EV
market. TSLA stock fell 1.00 today.
Tesla stock surge faces a hurdle: Potential annual sales drop
Gold had its biggest gain in 14 years, with a 27% advance
fueled by US monetary easing, sustained geopolitical risks & a wave of
purchases by central banks. While bullion has ticked lower since Donald
Trump's sweeping victory in Nov's US presidential election, its
gains over 2024 still outstrip most other commodities. Base metals have
had a mixed year, while iron ore has tumbled & lithium's woes have
deepened. The varied performances over 2024
highlight the absence of a single, overriding driver that's steered the
complex's fortunes, while also putting the spotlight on how metals, both
base& precious, may fare next year. For 2025, investors are focused
on uncertainty around US monetary policy, potential frictions from
Trump's presidency & China's efforts to revive growth. Gold's
strong gains this year, which have seen the precious metal set a
succession of record highs, may signal a possible shift in the market's
dynamics given they have come despite a stronger $ & rising
real Treasury yields, both typically headwinds. The precious metal has been “as remarkable as it’s been relentless, making it my biggest market surprise of 2024.
Gold Heads for Biggest Gain Since 2010 in Mixed Year for Metals
Oil prices were on track to end 2024 with a 2nd consecutive year of losses, but were steady on the day as data showing an expansion in Chinese manufacturing was balanced by Nigeria targeting higher output next year. Brent crude futures fell by 7¢ to $73.92 a barrel & US West Texas Intermediate (WTI) crude lost 4¢ to $70.95 a barrel. At those levels, Brent was down around 4% from its final 2023 close price of $77.04, while WTI was down around 1% from where it settled on Dec 29 last year at $71.65. In Sep, Brent futures closed below $70 a barrel for the first time since Dec 2021, while their highest closing price of 2024 at $91.17 was also the lowest since 2021, as the impacts of a post-pandemic rebound in demand & price shocks from Russia's 2022 invasion of Ukraine began to fade. Oil prices are likely to be constrained near $70 a barrel in 2025 as weak demand from China & rising global supplies are expected to cast a shadow on OPEC+-led efforts to shore up the market. A weaker demand outlook in China in particular forced both the Organization of Petroleum Exporting Countries (OPEC) & the Intl Energy Agency (IEA) to cut their oil demand growth expectations for 2024 & 2025. With non-OPEC supply also set to rise, the IEA sees the oil market going into 2025 in a state of surplus, even after OPEC and its allies delayed their plan to start raising output until Apr 2025 against a backdrop of falling prices. Investors will also be watching the Federal Reserve's rate cut outlook for 2025 after central bank policymakers earlier this month projected a slower path due to stubbornly high inflation. Lower interest rates generally incentivize borrowing and fuel growth, which in turn is expected to boost oil demand. Markets are also gearing up for Pres Trump's policies around looser regulation, tax cuts, tariff hikes & tighter immigration, as well as potential geopolitical shifts from Trump's calls for an immediate ceasefire in the Russia-Ukraine war, as well as the possible re-imposition of the so-called "maximum pressure" policy towards Iran. Prices were supported today by data showing China's manufacturing activity expanded for a 3rd straight month in Dec but at a slower pace, suggesting a blitz of fresh stimulus is helping to support the world's 2nd-largest economy.
Oil prices set for second annual loss in a row, stable day on day
Stocks slipped to conclude trading in 2024, extending an uncharacteristic limp to the finish after a roaring year of trading. Despite the sour final stretch, NAZ Composite was up almost 30% & Dow posted a more modest 13% gain for the year. The S&P's annual gain roughly matches 2023's performance, logging the highest consecutive back-to-back annual gain in nearly 30 years. Overall, the good times have stalled in the last week, as markets have given up some of their big gains, all the more uncharacteristic considering the typical Santa Claus rally that marks the end of the year. Next year should have some exciting times.
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