The US housing market continues to gain steam: New home sales for June were up by 8.3% to a rate of 497,000 units annually -- the highest level in five years -- despite rising mortgage rates. Compared with June last year, single-family home sales were up 38.1 percent, the largest increase since January 1992, writes Reuters. Bill McBride notes that the supply of new homes has also returned to normal (after peaking in 2009) and, furthermore, even with the increases, sales rates are just at the low levels of previous recessions, which “suggests significant upside over the next few years”.
Who, though, is doing all of this buying? Back in May the buy-to-rent business was exploding, fueled by Wall Street-backed institutional investors like the Blackstone Group and the aptly named American Homes 4 Rent, the latter of which announced an IPO last week. Barry Ritholtz argues this can’t possibly continue, pointing to the massive surge in rental properties on the market in Scottsdale, Arizona in the last four months: “How the hell can they be making money when there are so many empty houses cooking in the desert sun?”
The Los Angeles Times reported last week that investors continue to buy, albeit at a slightly slower pace, even after a nearly 30% average price increase in Southern California in the last year. Buyers who don't intend to live in the home accounted for 29% of purchases in June, and more than 30% of purchases in the region were in cash. But that seems to be changing: "The smart money has left the building," broker Glenn Kelman told the LA Times.
Meanwhile, individuals seem to be taking more risks in the housing market. CNBC reports that 136,184 homes were flipped in the last six months, up 19% from this time last year, and 74% from the first half of 2011. Adjustable-rate mortgages, in which rates change after a fixed period of 5-10 years, are also more popular than they have been since 2008, according to Bloomberg.
However, lest your takeaway from today’s email be “Have we learned nothing?” just remember that attempts to bring back the synthetic CDO in the past couple of months have failed miserably. -- Shane Ferro
On to today’s links:
Be Afraid
"One of FratPAC’s top priorities is a tax break for fraternities" and stopping anti-hazing legislation - Bloomberg
New Normal
Welcome to the lucky-take-all society - Economist
Alpha
The Justice Department expects to charge SAC Capital on Thursday - Matthew Goldstein and Emily Flitter
EU Mess
Is the euro zone recession over? Not quite yet... - Open Europe Blog
"Europe's recession has either come to an end, or it's about to" - Joe Weisenthal
Popular Myths
Summer vacation was a response to urban squalor, not rural necessity - Grand Rapids Press
What sequester? Defense on contractors are doing just fine - WaPo
Greats Minds
SAC's lawyer channels Jerry Seinfeld channeling Kevin Costner - Bess Levin
Longs Reads
Inside Al-Shabaab, the Al Qaeda affiliate in Somaliland - Mark Hay
Data Points
54% of U.S. adults think we're still in a recession - WSJ
Legalese
The federal court fight over Detroit's right to declare bankruptcy has begun - Reuters
The US killed an IMF amicus brief in favor of the Supreme Court taking up Argentina's pari passu case - Joseph Cotterill
Charts
Who works the longest days - NYT
China
Chinese hospitals depend on bribery to keep running - Kazunori Takada
Strange Bloomberg Headlines
"Humans Beating Robots Most Since ’08 as Trends Shift: Currencies" - Bloomberg
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