Traders may want to keep an eye on the attitudes of millennials when it comes to owning versus renting, which could influence the Direxion Daily Homebuilders and Supplies Bull 3X Shares (NAIL ).
So far, renting appears to be the preference as apartment demand in the second quarter of 2019 increased by 11% compared to a year ago. This pushed rents up an average of 3% nationally to $1,390 per month, according to RealPage, a real estate software and analytics company.
“Demand is proving especially strong in this year’s primary leasing season,” said RealPage’s chief economist, Greg Willett. “Solid economic growth is encouraging new household formation, and rentals are capturing a sizable share of the resulting housing demand. At the same time, loss of existing renters to home purchase remains limited relative to historical levels.”
82% of renters say it is the more affordable option compared to owning a home based on a survey from Freddie Mac.
“Affordability remains the essential factor when it comes to determining whether to rent or purchase a home, and the cost of housing is having a significant impact on households of every age, size and location,” said David Brickman, president and CEO of Freddie Mac. “For millennials and many Gen Xers, buying a home is no longer just a decision based on housing and housing costs—increasing pressure from student loans and the rising cost of child care are having a significant impact.”
Summer has arrived and that could mean a boost in real estate activity as prospective buyers, especially parents, look for homes ahead of the start of the new school year in the fall. A rise would be a welcome sign given that home prices have been on a downward slide for the last 13 months, but that could all change soon.
“According to the latest S&P CoreLogic Case-Shiller National Home Price Index, home prices in the United States grew by 3.5% in April,” wrote Ralph McLaughlin, Deputy Chief Economist at real estate data company CoreLogic. “This is the 13th consecutive month of slowing home-price growth, which is now at its lowest level of growth since September 2012. However, there are signs the streak may not last, as half of the 20-cities have reversed course and witnessed a quickening of price increases in April.”
A confluence of rising interest rates and low affordability have made the housing market a challenging space in 2018, but that could all be changing with the NAHB/Wells Fargo Housing Market Index holding steady.
To start 2019, contracts to buy existing homes rose 4.6% in January versus December, according to a monthly survey from the National Association of Realtors (NAR). However, contracts were still 2.3% lower versus a year ago, which makes it thirteenth straight months of declines annually.
Furthermore, the central bank has been sounding increasingly dovish as of late, which could mean that less rate hikes than anticipated for 2019 and even possible cuts–something that could give additional help to a sector that is in need of a much-needed boost.
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