Market 12/26: US housing market continues to tighten at year-end

US home prices rise for the 9th consecutive month - real estate sector challenges

Home prices in the 20 largest US cities in October rose +0.64% M/M — the 9th consecutive m/m increase.

The corresponding Y/Y home price increase is +4.87% — the highest since 12/2022.

Miami and Detroit saw the strongest monthly home price increases; while home prices on the West Coast fell sharply, exemplified by San Francisco, Portland, and Seattle.

US home prices have risen >40% over the past three years - one of the fastest increases recorded in history.

On average, homeowners have mortgages with a fixed rate of 3.74% → protected from the impact of Fed rate hikes.

Challenges in the residential real estate and commercial real estate markets:

The vacancy rate for residential real estate is also at a record low, reflecting one of the tightest housing markets in history:
- low housing supply,
- new buyer demand is also low while existing homeowners are locking in low-rate mortgages from previous years.

For commercial real estate:
- Rental apartment vacancy rate reaches 6.6%, the highest in over 2 years.
- Average rent falls to 1,967 USD/month, marking the largest decline in 3 years.
- Aon Center, the third largest building in Los Angeles, was just sold at 45% below the 2014 purchase price.
  - This severe price drop occurs amid US office building prices falling 35% from the Q1 2022 peak.
However, as 2023 mortgage rates continue to climb to high levels, home prices are expected to decline in the short term.

Oil prices maintain weekly gains as Red Sea tensions escalate

British Navy reports sighting drones and missiles in two explosions on the Red Sea shipping route.

Amid escalating Red Sea tensions, oil prices stabilize after recording the largest weekly gain in over 2 months.

Global crude oil and fuel shippers are struggling with high shipping costs + extended transit times due to

Avoiding conflict at the Suez Canal
Record low water levels at the Panama Canal causing difficulties for long-range tankers.

However, shipping giant Maersk prepares to resume Red Sea routes after the US deploys commercial security operations in the area.

China: Year-end stocks decline under deflation pressure

Shanghai Composite Index (SCI) continues to fall below 2900 points:

SCI has fallen -15% from the 04/2023 peak, while global stocks (MSCI World Index) have risen +13% in the same period.
=> i.e., Chinese stocks have extremely low performance, underperforming the global average by ~ -28%.

The bleak situation in the Chinese stock market is largely due to macroeconomic factors in the economy: collapsing consumption - leading to deflation in recent months:

Other news

Global banks cut >60,000 jobs in 2023, marking one of the heaviest layoff years since the 2008 financial crisis.

Mastercard report shows US holiday retail sales up +3.1% y/y, down from +7.6% last year — high interest rates and inflation also pressuring consumer spending

Holiday spending from November 1 to December 24 has declined over the past two years

Iron ore rises above 140 USD — highest since 6/2022, as Beijing efforts to stem real estate market weakness

UK forecast to be Europe's fastest-growing economy over the next 15 years, narrowing the gap with Germany and overtaking France.

China criticizes US sanctions on Russian project: “China's participation in the LNG 2 liquefied natural gas project should not be subject to interference or restrictions from third parties”

Israeli Prime Minister Benjamin Netanyahu has outlined three prerequisites for peace in the war with Hamas, including: destroying Hamas, demilitarizing Gaza, and deradicalizing Palestinian society.

Israeli government subsidizes Intel Corp with 3.2 billion USD for new chip factory worth 25 billion USD.
- Intel shares rebound amid lackluster market.