Stocks opened the day higher then fell 200 points when President Trump told “Our Dear Leader” that the June 12th meeting betwixt the US and NK was off. After the initial selloff the markets then rallied and the Dow ended the day with a closing loss of 75 points at 24,811. Trading volume was lower. The trading action today shows that while underlying fundamentals are solid, the day to day market action is being driven by headline geopolitical news.
New Home sales fell 1.5% in April to an annual rate of 662,000. While this was less than expected, the bad news in this report is that downward revisions to prior months removed the notion of an acceleration in the sales pace. That being said however, sales are still up 11.6% over the past year.
“Used” or existing home sales fell 2.5% in April which was more than expected and due largely to a shortage of properties for sale. Inventories are down 6.3% from a year ago and the median house price increased 5.3% from a year ago and now stands at $257k which marked the 74th straight year of over year price gains.
Home builders in Seattle are facing huge cost increases and tighter profit margins as a result. The biggest cost driver is labor which is being pushed up by minimum wage laws and a tight labor pool. Then land costs are up and on top of that, lumber prices are shooting through the roof thanks to Canadian lumber tariffs, mill capacity issues and other things like transportation costs. Investors who want to build and sell right away are starting to pause or even back away from projects because original cost projections have given way to increases that threaten any hope of making money. Longer term apartment investors and home owners with means are still moving ahead but grumble over cost increases. While demand for housing is still good, higher costs are beginning to affect supply. It will be interesting to see how this develops.