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The U.S. Week Ahead (Aug 19-23), The Housing Sector

By:

Senior Market Analyst at Interactive Brokers

Interactive Brokers’ senior market analyst Steven Levine provides some insights into the US housing market. As interest rates continue to plunge amid global growth fears, there are also a host of other headwinds. Find out more in The U.S. Week Ahead (Aug 19-23), Housing Sector Faces a Twister at IBKR Traders’ Insight today!

Produced on August 15, 2019

Video Transcript:

Among the economic data releases in the week ahead, investors will receive updated figures on the U.S. housing market – this as sour market sentiment has spurred a recent plunge in interest rates. While market participants had generally enjoyed a brief respite from recent trade-inspired risk aversion after U.S. President Donald Trump said he would delay imposing 10% tariffs on some Chinese imports to mid-December, gloomy economic data out of China and Germany had reignited a bond rally. In fact, yields on the 2-year and 10-year U.S. Treasury had inverted early Wednesday, stoking fears about a coming recession, and inspiring an 800-point drop in the Dow.

Against this backdrop, the National Association of Realtors is set to unveil July’s existing home sales numbers in the week ahead after purchases fell 1.7% in June. Lawrence Yun, N-A-R’s chief economist, said home sales are “running at a pace similar to 2015 levels – even with exceptionally low mortgage rates, a record number of jobs and a record high net worth in the country.” He noted that the U.S. is facing a housing shortage and “much more inventory is needed.”

Meanwhile, market participants will also receive new home sales data for July later in the week, following a 7% rise in the sales of new single-family houses in June. Overall, mortgage rates have remained in a historically low range – this amid a variety of economic stimulus measures by the Federal Reserve since the 2008 housing crash.

In Wells Fargo’s second quarter earnings results, for example, the bank said mortgage originations had increased by US$20bn over the previous quarter, due in large part to higher refi volumes from lower interest rates. Moreover, the New York Fed’s Center for Microeconomic Data said that mortgage originations climbed in the second quarter to the highest volume in almost two years.

Against the landscape, the intensified and escalating trade dispute between the U.S. and China, coupled with the recent yield curve inversion, deteriorating manufacturing conditions in many nations, along with slowing global growth and geopolitical uncertainties, including Brexit and Hong Kong’s ongoing protests, may ultimately pose a threat to the confidence of the American consumer. President Trump said that the delay in the tariffs on Chinese goods, for example, was meant to mitigate any potential impact on U.S. customers during the upcoming Christmas shopping season. 

And while the current state of the housing market may seem rosy, the long list of global uncertainties has instilled a risk-off tone in housing-related stocks and exchange-traded funds such as Home Depot, Lowe’s and the Vanguard Real Estate ETF.

Meanwhile, investors will be closely watching economic developments for further signs of slowing growth and recession signals. Releases in the week ahead will also include weekly inventories of crude oil stocks, the Fed’s July meeting minutes, a flash reading of Markit’s manufacturing PMI, and durable goods orders.

In the meantime, select the Event Calendar option in the IBKR Trader Workstation for a full list of U.S. and global corporate events and earnings, dividend schedules, economic data, IPOs and more. I’m Steven Levine for Interactive Brokers, asking you to enjoy the week ahead.

Disclosure: Interactive Brokers

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: Author Security Holding: No Positions

The author does not hold any positions in the financial instruments referenced in the materials provided.

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