Housing “Cocktail” Drives Prices Higher?

The housing market has been one of the slowest sectors to recover from the doldrums of the 2008 great recession.  Over the last couple of months, the numbers suggest a changing trend, at least for now.  Add this to your cocktail shaker: record low interest rates, pent up demand from our shutdown, the desire to de-city, and limited housing supply make a mouth-watering cocktail!  Last week home builder’s confidence report rose to 78 (anything above 50 is considered positive), U.S. housing stats were up 22% from June, and existing home sales rose 24%.

 

The average median home price rose 8.5% annually, to an all-time high of $304,000.

This tends to be good news for the overall economy as homes are purchased, many durable goods and other household goods are also purchased, driving overall economic activity.

Stocks Rise, But not all!

Fewer and fewer stocks are pulling the major markets higher.  For the week, the Dow Jones inked out a gain of .09%, the S&P 500 rose .77%, and the Nasdaq Composite led the way… up 2.6%.

US Mid-caps and Small-caps were each down over 1% and International stocks were also in the red for the week.

It’s no secret that companies such as Apple, Microsoft, Amazon, Facebook, Alphabet and Tesla are responsible for much of the gains so far in 2020!  As of last Friday, Apple is up 69%, Microsoft 35%, Amazon 77%, Facebook 30%, Alphabet 18%, and Tesla leading the way up 390%.

As of now Priced to Earnings, P/E Ratios don’t appear to matter with all of the above stocks having “Forward PE’s ” over 30, except Amazon at 111 and Tesla at 313.  A forward Price to Earnings ratio is an estimate of earnings expected to be generated over the next 12 months.

Certainly a lot of optimism!  It will be interesting to see where these stocks are 12 months from now, both in actual earnings and stock price.

Back to School/Entertainment

Back to school activity is a significant contribution to economic activity in the form of sales and employment.  Clothing, computers, school supplies, and sporting equipment sales typically are a bridge until the year-end holiday season begins.  Computer sales are certainly robust, however all else looks to be muted for now.

The importance of back to school cannot be under-estimated.  Opinions range on the importance of having our children interact and learn in-person, parents with children being able to work versus the view of continued infections.  Certainly no obvious answer, however very important to all.

It may be interesting to see how this impacts the cost of college going forward!!

I do believe it’s OK for parents to have a choice to send their children to school in-person or virtually. In addition we should also have the same choice to work out at our local gym and perhaps even dine inside at a limited capacity restaurant.  If I went to my “open” gym, witnessed people not socially distancing and following protocol, I would just leave, it that’s simple.  If I go to a restaurant that looks unsafe, it’s simple, just leave!!  It’s a shame so many of us have to pay the price for so few!!

 

 

 

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