But if I knew how to manage my portfolio safer and smarter than most hedge fund managers, I could realistically grow my wealth.
Why homebuilder sentiment is approaching last year’s highs
The index came in at 55—an increase from 53 in July. Builder sentiment peaked last summer and had fallen to the mid-40s over the winter and through the spring. However, sentiment is picking up again. It’s approaching last summer’s levels.
Increases in foreclosure activity correlate with lower home prices because distressed properties tend to trade at a discount to non-distressed properties. Foreclosure sale prices are typically 26% lower than non-distressed prices.
Increases in industrial production generally signal increases in employment. Lower-skilled workers have struggled since the financial crisis. This has dampened aggregate demand and consumption.
Economic activity increases causing inflation. The Fed raises interest rates in response the increased inflation. The business activity slows, the inventory builds up, and workers get laid off. Once the inventory is worked down, the workers are rehired and another expansion begins.
The U.S. economy is experiencing a bit of a manufacturing renaissance because cheap energy costs have offset the cheap labor arbitrage that contributed so much to offshoring. Also, manufacturers are realizing that extended supply chains are extremely vulnerable.
The General Business Conditions Index showed that manufacturing continued to expand in New York, but at a slower rate than the month before. 31.4% of respondents reported better conditions, while 16.7% reported worse conditions—the net result was 14.7%. This was a decrease from last month.
The average 30-year fixed-rate mortgage increased three basis points to close at 4.28%. The the ten-year yield fell eight basis points. To-be-announced securities (or TBAs) moved higher. Recently, mortgage rates have been increasing even though the bond market has been flat.
Consumer sentiment is a critical factor in risk-taking. In fact, KB Home (KBH) in a recent earnings conference call cited consumer confidence as a more important variable than interest rates.
The average 30-year fixed-rate mortgage decreased four basis points to close at 4.25%. The ten-year yield fell seven basis points, but to-be-announced securities (or TBAs) were largely unchanged.
Consumption is the major driver of the U.S. economy. It accounts for 70% of GDP. Consumption has been relatively subdued since the recession began, as Americans have boosted their savings rate and spent only on essentials.
The index finished the week at 36.2, a small drop from the prior week. The report is on balance negative. This isn’t surprising, given that the index itself is below 50.
Standard Pacific (SPF) reported net income of $56.5 million, or 14 cents per share, for the second quarter of 2014. Net income increased 49% from $146 million, or 11 cents per share, in the second quarter of 2013.
While Standard Pacific does cater to the first-time homebuyer, it has de-emphasized that market since the housing bust began. This was a smart decision.
Company-wide gross margins increased sequentially to 26.7% in the second quarter from 25.9% in the first quarter of 2014 and 23.9% in the second quarter of 2014.
Standard Pacific (SPF) reported second quarter revenues of $598.6 million. This was a 36% increase year-over-year and a sequential increase of about 29%. Revenues handily beat Wall Street expectations of $562.5 million.
Founded in 1965, Standard Pacific (SPF) is a Southern California–based builder with operations in California, Florida, the Carolinas, Texas, Arizona, and Colorado.
The stimulus plan from early in President Obama’s term has been credited with turning around the economy from its adherents—however, it has been characterized as a waste of money from its detractors.
In the past ten years, they’ve averaged well below that number—around 1.3 million units a year—when you consider population growth, you can see that starts have been depressed for quite some time.
Luckily for the first-time homebuyer, housing prices fell from the lofty levels experienced during the boom years and finally became affordable—between low prices and low borrowing rates, the first-time homebuyer should’ve been set.
Construction spending is just off its post-recession high, but it’s still depressed—current levels equate to mid-2003 spending levels—construction spending peaked at $1.2 trillion in March, 2006.