Home Prices Get Their First Look At COVID-19
/Have a great week,
Brian E Betz, CFP®
Principal
The Bear Market Is Still A Cub
/Have a great week,
Brian E Betz, CFP®
Principal
Home Prices Plow Higher While Stock Prices Hit A Wall
/As home prices surge, Seattle real estate clings to its lead.
Real estate appreciated by an average of +1.0% nationwide during the month of April and +6.4% over the trailing year. Seattle real estate blew away those averages, rising nearly +3.0% monthly and +13.1% annually. Seattle homes continue to lead the country, in what has been an impressive streak over that past couple years. But that streak may end soon as Las Vegas narrowed the gap even further, where homes have risen +12.7% yearly. San Francisco is back in the mix as well (up nearly +11.0%) and could reclaim the top spot.
All 20 major cities tracked in the Case-Shiller report were positive during the month. Here is a complete look at how home prices have changed across the 20 major cities:
This data is very encouraging considering that April is a telling month when it comes to home sales. There is a two-month lag on this data, so I am interested to see how the numbers look for May and June. An annual appreciation rate of +6.0% is nice and steady and just what we want to see. But with mortgage rates on the rise that growth rate is likely to come back a bit in the coming months.
In The Market...
The S&P 500 fell -1.3% last week. Let's look under the hood:
(price data via stockcharts.com)
The S&P index fell for the second-straight week. Only three of the 10 stock sectors were higher, with the defensive Utilities sector as the big riser. Half of the sectors lost more than -1.0% apiece on the week.
Bond values rose as well as interest rates have fallen in five of the past six weeks. After the 10-year U.S. Treasury Bond yield rose to 3.0% back in April it has gradually slid lower. In the long run I do think the 10-year yield will get back above 3.0% but this short-term decline is not a huge surprise following the spike that rates had gone through since the beginning of the year.
The S&P 500 gained +0.6% in June, which is good but the bigger picture remains pretty blurry. The losses over the past two weeks has resulted in a second failed attempt to reclaim the record high from January. I have circled these two instances in the following chart of the S&P 500:
(chart created in stockcharts.com)
The market has gone nowhere over the past five months. It is concerning that the S&P 500 has been rejected both times it has run up against those two price-points highlighted above. But perhaps more telling than this price movement is the fact that there are fewer companies whose individual share prices are above their respective 200-day moving averages. This is shown in the lower, smaller chart (red line). Entering this week only 55% of those 500 companies are above their 200-day moving averages. Should that percentage fall much further it could result in a much larger market sell-off. This was the case back in Aug. 2015, Sept. 2014 and July 2011.
It is too soon to know if history will repeat itself in terms of a sell-off. We did sell our Consumer Discretionary sector position last week (XLY) as our analysis indicated it could be topping a bit in the near-term. This frees up a bit of cash to take advantage of discounted prices, should the market in fact fall in the coming days/weeks.
In Our Portfolios...
What's New With Us?
I will be out of town this Thursday and Friday, but will be available remotely. I hope everyone has a fun and safe July 4th holiday!
Have a great week,
Brian E Betz, CFP®
Principal