February new home sales prices increased to 8.3 percent which is the largest jump in years.
On the other hand.
U.S. new home sales fell 1.6% in February to a 313,000 units pace. This was lower than what was expected and lower than the 318,000 number which came in for January.
Just as things on the macro side begin to brighten, oil, the price of dark oil begins to rear its ugly head.
It is very possible the U.S. could slip into another recession if oil prices reach around $150 per barrel.
Every ten dollar rise in oil will take take about 20 basis points off U.S. GDP growth in each of the first two
years of the price hike. Its important to remember that Gasoline, motor fuels, and fuel oil account for 5.5% of household spending, and rising.
A $10 rise in crude oil prices will hike gasoline prices by about 25 cents (8%) and cut consumers’ purchasing
power by about 0.4% which is a large number in this fragile recovery.
Monday, March 26, 2012
Monday, March 19, 2012
The case for reits
REITs offer potential for both capital appreciation and dividend increases. When the economy is doing well, companies expand and rent more office space. Employees, in turn, feel confident and rent larger apartments or storage units.
Companies also send employees out on the road to attract new business, so hotels do well. As businesses increase production and distribution of goods, they use more industrial space. And, with all this demand, REITs generally have increased pricing power.
The outlook for residential REITs looks positive. A lower homeowner rate, despite government incentives, and modest new supply (construction) look like they are both working in favor of multi-family operators.
Indeed, residential REITs — which usually own apartment buildings — reported average occupancy figures of more than 95% for the fourth quarter of 2011, allowing a push on new rents to higher levels.
Rents will continue to increase and roll through apartment portfolios in 2012 as U.S. job markets look to slowly recover. Many apartment REITs are also expressing renewed interest in acquisitions. The number of bidders and property valuations has increased in recent months.
It is easy to see a positive fundamental outlook on retail REITs as well. Although challenges remain and raising rents is always a contentious issue, its easy to think that increasing absorption of retail space should present retail landlords with more pricing power. If consumer spending and retail sales improve over the next 12 months, this should prompt a further slowdown in store closings.
The national office vacancy rate has stabilized at about 17.0%, up from about 12.5% at the end of 2007. If the economy improves vacancy levels should edge down in 2012.
Companies also send employees out on the road to attract new business, so hotels do well. As businesses increase production and distribution of goods, they use more industrial space. And, with all this demand, REITs generally have increased pricing power.
The outlook for residential REITs looks positive. A lower homeowner rate, despite government incentives, and modest new supply (construction) look like they are both working in favor of multi-family operators.
Indeed, residential REITs — which usually own apartment buildings — reported average occupancy figures of more than 95% for the fourth quarter of 2011, allowing a push on new rents to higher levels.
Rents will continue to increase and roll through apartment portfolios in 2012 as U.S. job markets look to slowly recover. Many apartment REITs are also expressing renewed interest in acquisitions. The number of bidders and property valuations has increased in recent months.
It is easy to see a positive fundamental outlook on retail REITs as well. Although challenges remain and raising rents is always a contentious issue, its easy to think that increasing absorption of retail space should present retail landlords with more pricing power. If consumer spending and retail sales improve over the next 12 months, this should prompt a further slowdown in store closings.
The national office vacancy rate has stabilized at about 17.0%, up from about 12.5% at the end of 2007. If the economy improves vacancy levels should edge down in 2012.
Friday, March 16, 2012
WELLS FARGO doubled their dividend.
After WELLS FARGO got approval from the FED, they doubled their quarterly dividend from $0.12 to .22 cents.
The increase is much larger than bank buyers were anticipating. This means that WFC is in a stronger position than many of its bank peers. Their capital levels and quality of their credit had to be sound for the FED to approve such a large increase.
The Fed also gave the green light to WFC for its aggressive capital plan. The capital plan includes share buybacks and redemptions of trust preferred securities.
The increase is much larger than bank buyers were anticipating. This means that WFC is in a stronger position than many of its bank peers. Their capital levels and quality of their credit had to be sound for the FED to approve such a large increase.
The Fed also gave the green light to WFC for its aggressive capital plan. The capital plan includes share buybacks and redemptions of trust preferred securities.
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