Panic In Real Estate And Car Markets But There Is Another Surprise

We are now seeing panic in the real estate and car markets but there is another surprise.

More Rate Hikes This Week
December (King World News) – Peter Boockvar:  We’re not just getting another rate hike from the Fed this week. We’ll also get them from the ECB (50 bps expected), BoE (50bps), SNB (50 bps), the Norges Bank (25 bps) and central banks in Taiwan (.125%), Philippines (50 bps), Mexico (50 bps)and Columbia (100 bps). 

At the same time we debate where private real estate entities should mark their portfolios each month, I read in Barron’s over the weekend data from Forge Global “which runs a marketplace for secondary trading of shares in pre-public venture backed companies.” According to the Forge CEO Kelly Rodriques, “in the first two months of the fourth quarter, the average transaction on the platform has been done at about a 50% discount to the last fund-raising round.” Being private doesn’t insulate one’s portfolio from reality…

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ALERT:
Legendary investors are buying share of a company very few people know about. To find out which company CLICK HERE OR ON THE IMAGE BELOW.Sponsored

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Homebuilders Looking To Dump Homes
What to do with all those new homes you’re building and your potential customer base of families that would live there are now challenged by affordability? Sell them to investors who are in the single family rental business. On Friday Bloomberg reported that

“Lennar is offering to sell thousands of homes to rental landlords at a time when sales to everyday buyers have slumped.”

The article went on to say:

“Lennar is circulating lists of properties to potential acquirers, according to people familiar with the matter, who asked not to be named because the process is private. Many of the properties are located in the Southwest and Southeast, the people said, with the builder giving landlords the chance to acquire entire subdivisions in some cases.”

I guess that’s a way to clear out excess inventory. 

Homeownership Rate
As of Q3, the US homeownership rate was 66%. It hovered around 64% in the ten years leading into 1995 and then took off, reaching a peak of 69.2% in June 2004 as the housing bubble really start to inflate. It bottomed at 62.9% in the implosion aftermath in 2016. The average going back to 1965 is 65.3%. I have to assume we might be on the cusp of heading back to that 64% level in coming quarters.

Inventory Of New Cars Continues To Surge
If you’re in the market for a new car, Cox Automotive said your choices continue to improve. They said US inventory rose by another 150k vehicles in November to hit 1.61mm which is the most of 2022. That is up almost 80% from November last year but still remains under the pre Covid level.

Contracting Credit For Car Buyers
The problem though for some is that prices are really expensive for cars/trucks and credit is getting tougher to come by. Cox also said on Friday that

“Access to auto credit tightened sharply in November, according to the Dealertrack Credit Availability Index for all types of auto loans…The decline in access reflected conditions that were tightest since October 2021…All credit availability factors moved against consumers in November as the approval rate declined, yield spreads widened, the subprime share declined, terms shortened, and the share of loans with negative equity declined.”

With the high sensitivity to the cost of money, first it was a slowdown in the pace of housing transactions and now we’re seeing it in auto’s, the bright spot for many industrial companies in Q3 as those inventories were being rebuilt.

While longer term bond yields in the US, Europe and parts of Asia have backed off their highs, the Japanese 10 yr JGB yield still remains stuck at .25% which tells us that the artificial suppression of YCC still really matters. It matters in terms of keeping it no higher than .25% and implies that if the policy changes, it’s going higher when it does. Japan is seeing north of 3% consumer price inflation and today they reported October PPI which rose by 9.3% y/o/y, 5 tenths more than expected.…….more here

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