Global CIO Commentary by Scott Minerd
Economic data continues to confirm that housing is the key pillar supporting continued U.S. economic expansion, generating 40 percent of second quarter growth. Concerns, therefore, about the effects of higher mortgage rates, up by over 100 basis points since May 1, 2013, are justifiable. Recent data releases have been mixed and much housing data lags by several months.
Video: U.S. Home Prices
U.S. home prices could appreciate 30-40 percent over the next 3-5 years
Two weeks ago, housing starts data appeared positive, ticking up to 896,000 from 846,000, with the biggest contributor being multi-family housing. But last Friday, new home sales came in at their lowest level in nine months, down 13.4 percent from June. New home sales are booked when a contract is signed, a key difference from existing home sales, which are booked months later when the deal closes. As such, new home sales are the most current indicator of housing activity. This makes the recent collapse of new home sales exceptionally disturbing. All told, there has been a 20.7 percent decline in new home sales in June and July. We would view any other business that experienced a 20 percent decline in activity over a two month period as in a highly difficult position. Putting all of this together, there is strong evidence that the economy is eroding below the surface. Importantly, this comes at a time when the U.S. Federal Reserve is under increasing scrutiny over whether it will maintain its apparent commitment to tapering its bond-buying after the Federal Open Market Committee’s September 19 meeting. My view is that it appears likely that the Fed will continue signaling that a reduction of its bond purchases will happen, but that the central bank will probably start hinting about taper-lite, or a smaller reduction of its bond buying, than it signaled back in June. As all this plays out, it appears as though volatility will continue to rise as we head into September.
Further Confirmation of U.S. Housing Slowdown
Pending sales of U.S. homes declined 1.3 percent in July, the largest monthly fall this year, following a 0.4 percent decrease in June. Pending home sales tracks the number of signed real estate contracts for existing homes and serves as a leading indicator for existing home sales. Given the fall in pending home sales and the plunge in new home sales, we expect existing home sales to follow this declining pattern soon.
U.S. PENDING HOME SALES VS. EXISTING HOME SALES
Source: Bloomberg, Guggenheim Investments. Data as of 7/31/2013.
Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC ("Guggenheim"). Guggenheim Funds Distributors, LLC is an affiliate of Guggenheim.
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objective, risks charges, expenses and the other information, which should be considered carefully before investing. To obtain a prospectus and summary prospectus (if available) click here or call 800.820.0888.
Investing involves risk, including the possible loss of principal.
*Assets under management is as of 6.30.2019 and includes leverage of $11.2bn. Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Funds Distributors, LLC, GS GAMMA Advisors, LLC, Guggenheim Partners Europe Limited and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC, an affiliate of Guggenheim, SI, GFIA and GPIM.
Guggenheim Investments. All rights reserved.
Research our firm with FINRA Broker Check.
• Not FDIC Insured • No Bank Guarantee • May Lose Value
This website is directed to and intended for use by citizens or residents of the United States of America only. The material provided on this website is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation. Investing involves risk, including the possible loss of principal.