U.S. home sales hit new mark
U.S. new-home sales rose in July to the highest level in more than a year as home builders continue to benefit from limited supply in the resale market.
Purchases of new single-family homes increased 4.4% to an annualized 714,000 pace after downward revisions to prior months, government data showed Wednesday.
The median estimate in a Bloomberg survey of economists called for a 703,000 pace.
With mortgage rates at the highest level in more than two decades, most homeowners are unwilling to move, keeping inventory on the resale market extremely limited.
That’s encouraged prospective buyers to seek out new construction, and builders are also throwing in more incentives.
However, the recent pickup in mortgage rates is weighing on home builder sentiment and already translating into weaker demand.
A report earlier Wednesday showed mortgage rates rose to 7.31% last week, the highest level since late 2000. That took a gauge of home-purchase applications down to the lowest level since 1995.
At the same time, a combination of tight supply and high costs continues to weigh on affordability.
The median sales price of a new home climbed to $436,700 from a year earlier, according to the Commerce Department’s report. That’s well above pre-pandemic levels.
The number of homes sold in July and awaiting the start of construction – a measure of backlogs declined to lowest level this year.
The data showed there were 437,000 homes for sale as of the end of last month. That represents 7.3 months of supply at the current sales rate, matching the lowest since early 2022.
Sales rose in the Midwest and West to the highest level since early last year, while they fell in the Northeast and South.
New-home sales are considered a timelier barometer than purchases of previously owned homes, which are calculated when contracts close.
Those sales fell to the lowest since the start of the year in July as inventory remained restrained, hurting affordability.
The new-homes data are volatile. The report showed 90% confidence that the change in sales ranged from a 8.4% decline to a 17.2% gain.
WeWork seeks restructure help
WeWork is rounding up advisers for help with a restructuring as it struggles with a heavy debt load and poor financial performance, according to people with knowledge of the matter.
The co-working giant has hired real estate adviser Hilco Global, once again tapped consultant Alvarez & Marsal and re-engaged law firm Kirkland & Ellis for advice on its options, according to the people, who spoke on the condition of anonymity because the matter is private.
The company is seeking to avoid a Chapter 11 bankruptcy filing and restructure its debts out of court, one of the people said.
WeWork’s ability to stave off bankruptcy will depend in large part on whether it can terminate or renegotiate a substantial number of its leases in more expensive markets, the people said.
The company earlier this month told investors there is “substantial doubt” about its ability to stay in business.
“We will continue to invest in our product offerings while simultaneously taking necessary steps to reduce rent and tenancy costs. Our members remain our priority and, regardless of any near term actions we may take, we will continue to operate and serve them for the long term,” a representative for WeWork said in a statement.
Representatives for Hilco, Alvarez and Kirkland didn’t respond to requests for comment.
A few years ago, WeWork was one of America’s most valuable start-ups.
Co-founder Adam Neumann aspired to remake the way people work, and the company’s mission statement included the imperative to “elevate the world’s consciousness.”
Neumann also sought to build a communal living business, WeLive, and an education business, WeGrow.
The company raised billions of dollars and signed longer-term leases on buildings around the world, planning to profit from leasing the space to clients short-term.
But WeWork’s disastrous effort in going public in 2019 resulted in Neumann’s ouster as chief executive officer.
The company ultimately went public in 2021 through combining with a special purpose acquisition company.
Its shares have plunged 97% in the last year, and its debt has fallen to deeply distressed levels, just months after it reached a sweeping debt-cutting deal with some of its creditors.
The company has continued to struggle as many people have persisted in working from home after the pandemic, cutting into demand for office space.
More than a third of desks in offices globally are unoccupied all week, a report said this week.
WeWork is focusing over the next year on cutting rental costs, negotiating more favorable leases, boosting revenue and raising money, it said in a statement earlier this month.
Earlier this month, WeWork added four restructuring specialists – Paul Aronzon, Paul Keglevic, Elizabeth LaPuma and Henry Miller – to its board.
Gold retains investor support amid slump
Gold isn’t losing its allure, according to a dozen money managers who all told Bloomberg News they expect to maintain or raise their exposure to the precious metal in the coming 12 months.
Bullion has stumbled in recent weeks in the face of multiple head winds from surging real yields to a stronger U.S. dollar and the prospect of U.S. rates staying higher for longer.
The survey of investors – from sovereign wealth managers to hedge funds – offered some modest optimism for price prospects into 2024.
None of the respondents said they would cut their exposure to gold in the immediate 12 months, and five of them said they expected to boost their allocations.
More than two thirds of them see prices rising, and five expect a clear all-time high.
From wire reportsThe poll was conducted between Aug. 10 and Aug. 22.
There’s still obvious uncertainty around when the Federal Reserve will end the bank’s tightening cycle, which would be an important positive for noninterest bearing gold.
Global central banks continue to grapple with stubborn inflation, and the U.S. labor market has remained surprisingly resilient in the face of aggressive monetary tightening.
While there’s some signs that investors are bracing for rates to stay higher for longer, the swaps market is still pricing in no more rate hikes, and a shift to policy easing next year.
“We do anticipate there’s pent-up gold demand from investors waiting for the Fed to finish,” said Darwei Kung, head of commodities and portfolio manager at DWS Group. “That’s a positive setup from our perspective.” He sees gold reaching a record $2,250 an ounce in the time period.
Bullion is currently trading near $1,900 an ounce, down about 8% from this year’s peak.
It reached a record in August 2020 at about $2,075, in the midst of global economic turmoil triggered by the COVID-19 pandemic.
To be sure, economists are getting more confident that the U.S. economy can glide to a soft landing, in a marked shift from widely-held views earlier this year that the economy would experience a sharp downturn.
A separate survey also showed expectations for higher gold prices.
Gold will trade at $2,021 per ounce 12 months from now, according to the median of 602 responses to Bloomberg’s Markets Live Pulse online survey of global readers conducted from Aug. 14 to 18.
The continued appetite for gold points to lingering worries about geopolitical tensions and macroeconomic uncertainties – for example, simmering tensions between the U.S. and China, war in Ukraine, or what’s next for China’s property crisis.
Other positive factors for gold include continued purchases by global central banks and relatively strong retail demand in emerging markets.
Meanwhile, a breakdown in the correlation between equities and bonds – a cornerstone of the popular 60/40 investment strategy – is also helping to make the case for the metal due to its ability to diversify portfolios, according to the World Gold Council.
“People are looking for things that really do move differently and gold does that,” the council’s head of institutional investor relationships for APAC ex-China, Jaspar Crawley, said at a panel in Sydney on Tuesday. “Diversification has now become a real thing.”