Diana Hill
Online Trading Academy
As we start 2016, I thought it might be good to look back on some of the trends from 2015. Looking back can give us a glimpse of the future.
Foreign buyers: The news media says things like, “Foreigners are buying up the U.S.!!!” Well, there is no doubt that there is a great deal of money coming in from many places around the world buying U.S. properties. Most of the foreign investing in the U.S. is concentrated on commercial and luxury markets. In my opinion, this is a positive thing for the real estate market at this time and it’s not affecting the middle class home buyer. I saw this happen in the 80’s when the Japanese where purchasing up all kinds of real estate.
Cash was still being used a great deal in 2015. In California it was reported that 23 percent of buyers paid all-cash. That fact is a strong indicator that the cash buyer market is still going strong.
Credit is easing up but not back to the early 2000 “standards”. According to Laurie Goodman Ph.D., Director of Housing policy at the Urban Institute, “Credit is expanding very, very slightly from absurdly tight levels. Lenders needed clarity before they were going to be willing to underwrite more risky loans, and they have not had that clarity. The good news is that everyone is aware they need it and it is beginning to happen very slowly.” There is evidence that the default rate is half of what it was in the years heading up to the mortgage crisis. This is evidence, Goodman maintains, that lenders have less to fear by taking on more risk.
Rents hit all-time highs with no stop in sight. USC Professor Raphael Bostic states that, “Our forecast continues to report that we will see rents increase pretty aggressively and I don’t see any signs that it is going to slow.” There are two main reasons: 1) many renters can’t get loans and 2) more individuals that are of age and means to buy are choosing to rent.
Lack of Supply/Inventory: We know that six to seven months of inventory is considered “the norm”. In 2015 we saw typically only three months’ worth of inventory. We know that with limited supply, prices increase.
There are a number of things that are leading to the historically low inventory numbers. These are just a few:
- Lack of new building: Since 2008 there have been unparalleled low levels of new housing starts. Builders are building but it’s more commercial product such as apartments, not SFR’s.
- Values are not back to 2007 levels. In many parts of the country values are back to 2007 levels but there are many more that haven’t reached those levels yet. Often sellers in these areas are waiting to sell until the prices come back to the 2007 levels.
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Editors’ Picks
EUR/USD hits two-day highs near 1.1820
EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.
GBP/USD reclaims 1.3600 and above
GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.
USD/JPY drops back below 157.00, as focus shifts to Japan snap election
USD/JPY is back in the red below 157.00 in the Asian session on Friday. The Japanese Yen recovers ground against the US Dollar amid some profit-taking ahead of Japan's snap general election on Sunday. The preliminary reading of the Michigan Consumer Sentiment Index report for February will be released later on Friday.
Editors’ Picks
EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates Premium
The EUR/USD pair lost additional ground in the first week of February, settling at around 1.1820. The reversal lost momentum after the pair peaked at 1.2082 in January, its highest since mid-2021.
Gold: Volatility persists in commodity space Premium
After losing more than 8% to end the previous week, Gold (XAU/USD) remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000.
GBP/USD: Pound Sterling tests key support ahead of a big week Premium
The Pound Sterling (GBP) changed course against the US Dollar (USD), with GBP/USD giving up nearly 200 pips in a dramatic correction.
Bitcoin: The worst may be behind us
Bitcoin (BTC) price recovers slightly, trading at $65,000 at the time of writing on Friday, after reaching a low of $60,000 during the early Asian trading session. The Crypto King remained under pressure so far this week, posting three consecutive weeks of losses exceeding 30%.
Three scenarios for Japanese Yen ahead of snap election Premium
The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.
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