Investor Intel

July began with a bang, as the big question was whether or not Greece would leave the Euro (it did not). Then there was China’s impending 1929 and Puerto Rico needing a bankruptcy lifeline, news which sent investors fleeing to safety in the U.S. bond market. With so much turmoil overseas, demand in May for U.S. exports fell $1.5 billion, or 0.8 percent.

Another big question was when the Federal Reserve will raise interest rates. Strengthening the case for a rate hike is U.S. consumer prices having risen in June for a fifth straight month, housing starts surging, and building permits soaring to a near eight-year high. In fact, it is the housing market that economists anticipate will mitigate the drag on the economy from the struggling factory sector. Federal Reserve Chair Janet Yellen told members of the House Financial Services Committee on July 15th that the Fed is likely to raise its main interest rate this year, assuming its forecasts for stronger growth and lower unemployment are realized (jobless claims are indeed at their lowest level in four decades). A survey taken July 2nd through July 8th by Bloomberg News found that 76 percent of 51 economists believe the Fed is likely to make its first move in September. In anticipation of the hike, investors are fleeing gold, which is at its lowest level in more than five years.

#Fanniegate continues with a U.S. Court of Federal Claims judge ordering the Treasury Department to release a massive trove of Fannie Mae and Freddie Mac conservatorship docs at the request of former investors who claim their ownership stake was illegally seized by the federal government. The Federal Housing Finance Agency meanwhile has been pushing the GSEs to transfer more of their losses from homeowner defaults to bond buyers and insurers. Talk has been that Freddie Mac plans to offer $300 million of mortgage-backed securities in an effort to manage the risk to taxpayers.

Speaking of Freddie Mac, its latest Primary Mortgage Market Survey showed mortgage rates retreating slightly after reaching their highest level of the year. The 30-year fixed-rate mortgage average is now 4.04 percent for the week ending July 23, 2015, down from the week prior when it averaged 4.09 percent. This slight decline can be attributed to a mixed bag of announcements, with the bad news being the many blue chip companies’ earnings failing to meet expectations, and the good news being that existing home sales beat market expectations.

And what good news it’s been for the housing sector! Foreclosure activity across the United States dropped to its lowest in a decade during the first half of 2015, according to recently released RealtyTrac data. In June, the median existing-home price for all housing types reached an all-time high of $236,400, thanks to rising demand and shrinking supply. According to a home price report from CoreLogic, the five states with the highest home price appreciation (including distressed sales) were: South Carolina (+10.3 percent), Colorado (+9.8 percent), Washington (+8.8 percent), Florida (+8.7 percent) and Nevada (+8.3 percent).

Existing-home sales are also at their highest pace since February 2007, at a seasonally adjusted annual rate of 5.49 million in June. Sales have increased year-over-year for nine consecutive months.

To meet this demand, groundbreaking on new homes rebounded strongly in June, increasing 9.8 percent to a seasonally adjusted annual pace of 1.17 million units. Permits for future home construction increased 7.4 percent to a 1.34 million-unit rate, the highest level since July 2007. The National Association of Home Builders recently released data showing builder confidence in the market for newly built, single-family homes at a nearly 10-year high in July.

With a strong housing market fueling U.S. economic growth, and average rental rates on 3-bedroom properties nationwide increasing 3 percent from a year ago, buying rentals “continues to be a brilliant strategy,” concludes Daren Blomquist, vice president at RealtyTrac. Without question, it will be an exciting next few months for the single-family rental investor.

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