Elliott Wave International’s Chief Market Analyst talks about the outlook for the U.S. housing market
A June 28 headline on CNBC reads, “Homeownership rate drops to 63.4%, lowest since 1967.” The report goes on to say “The number of occupied housing units grew, but all on the renter side.”
What does this change mean for the future of real estate in the U.S.? Will the recent rebound in mortgages and real estate prices continue?
Listen to this clip from Steve Hochberg’s recent presentation at the San Francisco MoneyShow to get Elliott Wave International’s unique perspective on the future of the U.S. real estate market (don’t miss the link at the bottom to watch 4 more clips from Steve’s presentation):
This article was syndicated by Elliott Wave International and was originally published under the headline Despite Low Rates, Housing Rebound is Weak. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
Going Bust for Growth (PDF)–Raghuram Rajan (to the Economic Club of NY)[biiwii comment: my personal central banking ‘hero’ speaks: “The current non-system in international monetary policy is, in my view, a source of substantial risk, both to sustainable growth as well as to the financial sector. It is not an industrial country problem, nor an emerging market problem, it is a problem of collective action. We are being pushed towards competitive monetary easing and musical crises.”]
Avago to Buy Broadcom for $37b–Bloomberg[biiwii comment: why again have we been interested in the semi’s since january of 2013? beuller? here’s the chart of former NFTRH+ highlight BRCM; not that that long-ago update had anything to do with this. that target was reached and exceeded a year ago… ]
Before each of the really ugly bear markets of the past 30 years, there has been an important signal from housing data well ahead of time. We do not have such a signal now, and so that portends more upside in the months ahead for stock prices.
In fact, the past 3 months have seen a pretty substantial upsurge, especially in the Northeast and South regions of the USA as tracked by the Census Department. That takes the seasonally adjusted annual rate of new home sales to its highest level since February 2008. Generally speaking, seeing this home sales data make higher highs has been good news for the long-term path of stock prices. It is when the two diverge that problems start to develop.
There really isn’t much to say about the housing market in the US right now except that economists clearly don’t know what to do with it. Having signed up wholeheartedly for the “booming” economy, or at least the narrative thereof, flagging sales in both new homes and resales doesn’t compute. Instead of recognizing why that may be, especially as it relates to the clear, obvious and unambiguous monetary influence in it all, the best they can come up with is something like this:
Lawrence Yun, NAR chief economist, says although February sales showed modest improvement, there’s been some stagnation in the market in recent months. “Insufficient supply appears to be hampering prospective buyers in several areas of the country and is hiking prices to near unsuitable levels,” he said. “Stronger price growth is a boon for homeowners looking to build additional equity, but it continues to be an obstacle for current buyers looking to close before rates rise.”
I’m at a total loss to understand what that statement actually means in anything like a real economic circumstance. According to basic supply and demand, “strong price growth” should not in any way be a constraint upon supply of houses for sale; quite the opposite. Mr. Yun takes this to an extreme whereby he actually supposes that lack of supply is restraining buyers!
Intel’s $50 Price Target is Quite Plausible–SeekingAlpha[biiwii comment: hmmmm, when it was in the mid-20’s and we targeted 40 everybody hated Intel. now the web is filled w/ intc-bullish material. funny how markets work…]
In February, The Elliott Wave Financial Forecast discussed the great boom in New York City’s residential real estate and its keen resemblance to what happened in 1929, when the demand for luxury housing also spiked to previously unseen heights. At 133 East 80th Street, we found this plaque commemorating the earlier era’s brick-and-mortar monuments to a Supercycle degree peak in social mood.
The plaque went up in 2010, demonstrating the strength of the bullish echo from the end of Supercycle wave (III) to the final after-effects of Supercycle wave (V). Another link to the prior manic era is that many of Rosario Candela-designed apartment towers from the 1920s have become “some of New York’s most coveted addresses.” As architectural historian Christopher Gray puts it, Candela is now Manhattan real estate brokers’ “name-drop of choice. Nowadays, to own a 10-to 20-room apartment in a Candela-designed building is to accede to architectural as well as social cynosure.”
Of course, the most brilliant stars in the New York skyline are those that sell for the highest prices, and that honor belongs to the brand new penthouses that the Financial Forecast talked about in February. Most are popping up along the rim of Central Park, forming a ring of cloud-topping towers that will be so pronounced it is already called Billionaires’ Row.
Here is a short video that shows two of them as they were topped off in February.
With interest rates on the freer sections of the curve (basically everything but Fed Funds) rising, some sectors stand to be hurt if ‘Taper to Carry’ is a viable plan; and some sectors stand to gain.
The Housing Index made a high right into a window where Fed officials felt compelled by bond market dynamics to start jawboning the inevitable. As they got wind of global forces driving up rates the control freaks got their jawbones revved up with ‘taper’ talk.
Housing put in a negative divergence and rounded into a daily downtrend. It now sports a short term ‘W’ pattern that has popped it above the 200 day averages as we had expected a bounce due to poor sentiment and a bigger picture downtrend channel line (by weekly chart in NFTRH). This bounce should hold below 195 for the HGX to remain in bear mode.
The banks on the other hand responded well to our ‘Taper to Carry’ plan and have since helped firm T2C. This with growing volume of taper talk. Just as housing would suffer from rising rates, banks would benefit as they borrow short (and nearly for free) and lend long (at a markup).
BKX is at a channel top and has some negative divergence. So it could get dinged in here perhaps with the media poo pooing taper talk and renewed hopes for open ended QE if the economy starts to show some cracks.
Speaking of cracks, the whole media circus and mainstream financial sphere is smoking something other than organic weed right now. Look at how absolutely obsessed the financial media are about a simple question of whether or not the Fed will scale back on its bond buying. The market is hyper-fixated on every squiggle in the drama and every warble in Bernanke’s voice.
As of now however, the HGX and BKX (among several other indicators) continue to lean toward a coming QE taper. Let’s see if current trends hold up.