Seattle's run is finally over.
For the past few years Seattle real estate has consistently ranked #1 in terms of annual price growth. That remarkable run ended when Las Vegas knocked Seattle from its perch in the latest S&P/Case-Shiller housing report. Homes in Vegas rose +13.0% year-over-year, compared to the +12.8% growth in the now second-ranked Seattle. San Francisco sits in third, up +10.7%.
On average, home values increased +6.0% in the past year nationwide, including +0.8% in the most recent month reported (June). Here is a full city-by-city look at the housing data:
Real estate continues to chug along, although the market here in Seattle does not seem as hot as one year ago. There are fewer homes for sale and those that are seem to be on the market longer than in 2017 and 2016. If we fast-forward one year I would anticipate we will see home values settle in to a +5% or so growth rate. So, slightly lower than what we see today.
In other news... here is something I never thought I'd see...
The ride-sharing service Lyft is reportedly preparing to go public in 2019, ahead of its rival, Uber. This seems crazy. Uber has become brand-synonymous, like Kleenex is to facial tissue. Uber has become a verb, like "Googling" has replaced "searching". Uber is much larger, both in terms of revenue and market share. Uber's most recent capital raise from Aug. 2018 valued the business at $71 billion. Lyft's most recent capital raise from June 2018 valued its business at $14.5 billion.
For Lyft to IPO before Uber it must be betting that it will continue to eat into Uber's market share in the coming years. Uber has had a slew of problems in recent years, which has opened the door for Lyft to carve out a bigger slice of the market. Whether Uber's problems have delayed its own IPO process is unknown. I believe so.
While most focus on Uber vs. Lyft, I have long contended that Amazon remains the biggest threat to both companies. I am not sure if Amazon will ever decide to enter the ride-sharing market, but if it does it would mean serious problems for both Uber and Lyft.
In The Market...
The S&P 500 gained +1.0% last week. Let's look under the hood:
So much for seasonality? The S&P climbed higher for the third-straight week and fifth-straight month, rising +3.2% in August. The ascent to new all-time highs ran counter to the poor seasonality typically associated with August. Most sectors were positive this past week, which was a quintessential "risk-on" week with the growth sectors leading the way and the more conservative ones lagging.
Looking ahead, stocks appear primed to rally. Here are 3 reasons why:
- The new record high for the S&P 500 is bullish because, well, new highs are bullish.
- Market strength is well distributed across all 10 sectors, as 70% of the 500 companies in the index have prices above their respective 200-day moving averages. This is a very important metric to us. The ratio is 10% higher (69% vs. 58%) compared to the number of stocks that traded above their 200-day moving averages back when this rally started in April.
- We are quickly approaching the fourth quarter, which is seasonally the strongest period of the market year. Given the contrary nature of how August just behaved this reason may seem less valid, but historically Oct/Nov/Dec. sees the best gains for stocks.
Of course, nothing is guaranteed so we will see. But right now the outlook is pretty good.
In Our Portfolios...
What's New With Us?
We stayed around Seattle this past weekend. We went to a bbq and took our daughter to the zoo. I did some work around the house, which included 4 or 5 hours fixing an issue with our refrigerator. The good news is I think I fixed it.
Have a great week!
Brian E Betz, CFP®