Connect with us

Uncategorized

The majority of housing markets across the country balancing out with 60 per cent anticipated to be balanced markets next year

The majority of housing markets across the country balancing out with 60 per cent anticipated to be balanced markets next year
Canada NewsWire
Toronto, ON and Kelowna, BC, Nov. 29, 2022

RE/MAX Canada expects average residential prices to decrease b…

Published

on

The majority of housing markets across the country balancing out with 60 per cent anticipated to be balanced markets next year

Canada NewsWire

RE/MAX Canada expects average residential prices to decrease by 3.3 per cent in 2023

  • The biggest price declines across the country are expected in Ontario and Western Canada, where some markets may see average residential sale prices decrease by 10 to 15 per cent
  • Price growth outlooks are anticipated in Atlantic Canada markets, with average residential sale prices expected to increase by eight per cent in Halifax and four per cent in St. John's in 2023
  • 60 per cent of regions in Canada are expected to be balanced markets in 2023, according to RE/MAX brokers and agents
  • 73 per cent of Canadians still say that home ownership is the best long-term investment they can make

Toronto, ON and Kelowna, BC, Nov. 29, 2022 /CNW/ -- Amid rising interest rates, and a looming recession, RE/MAX Canada is anticipating a modest decline of 3.3 per cent in average residential sales prices across the country in 2023. The estimates are based on surveys of RE/MAX brokers and agents from coast to coast, as reflected in RE/MAX's 2023 Canadian Housing Market Outlook Report.

To view the full interactive report, please copy and paste this link into your browser:

https://rem.ax/CanadianOutlook 

In sharp contrast to 2022, most regions analyzed in the report will experience more balanced conditions in 2023 – a trend that's already starting to materialize in many regions as a result of current economic conditions.

Download the 2023 Canadian Housing Market Outlook Report Data Table

According to a Leger survey commissioned by RE/MAX as part of the report, Canadians view home ownership as the best long-term investment they can make (73 per cent). Yet, the majority (67 per cent), are feeling less optimistic in the short-term with 67 per cent less inclined to buy in the first half of 2023, and 62 per cent less inclined to sell in that time frame.

"It's good to see the majority of markets moving toward more balanced conditions, which is typically defined by 45 to 90 days on market. This is a much-needed adjustment from the unsustainable price increases and demand we saw early in 2022," says Christopher Alexander, President, RE/MAX Canada. "Many Canadians have understandably expressed hesitancy about engaging in the real estate market early in 2023, in the wake of rising interest rates and broader economic uncertainties. However, despite this, a greater number of Canadians consider real estate to be a solid long-term investment compared to this time last year. As we head into the new year, it's important that governments work collaboratively to support housing affordability and address the supply challenges that Canadians continue to face, in order to make home ownership feasible for those who want it."

"We're confident that as economic conditions improve and the market continues to even out into Q3/Q4 2023, a more-regular pace of activity will resume. It's especially critical during challenging economic times, that staying informed and working with an experienced real estate professional can help Canadians clarify some of the unknowns, help them find a home within their means, and ultimately make the best decision possible," says Elton Ash, Executive Vice President, RE/MAX Canada.

A regional overview: 2023 Canadian housing market insights

RE/MAX brokers and agents in Canada were asked to provide an analysis of their local market in 2022 and share their estimated outlook for 2023. Based on their insights, 60 per cent of housing markets in Canada are expected to be balanced markets in 2023, impacted by modest price declines and less activity.  

With the exception of Halifax, NS, Ottawa, ON and the region of Montreal, QC, balanced market conditions are expected in Canada's major city centres, including the Greater Toronto Area (GTA), ON, Greater Vancouver Area (GVA), BC, Calgary, AB, Regina, SK and Winnipeg, MB, in what is being called a healthy development. Move-up and move-over buyers are driving activity in these regions with the exception of Ottawa, ON and Calgary, AB, where first-time buyers are expected to lead. Following a two-year frenzy fuelled by the pandemic, average residential sale prices are anticipated to decrease in Canada's priciest markets – the GVA and GTA.

Greater Toronto Area (GTA), Ontario

The Greater Toronto Area (GTA) is currently a balanced market – a condition that is anticipated to continue into 2023. Move-up and move-over buyers have been driving demand in the region in 2022, in a trend that is expected to carry on in the next year. Meanwhile, single-detached homes remain the dominant housing type, followed by condo apartments. The luxury market in Toronto has slowed down and will likely continue to cool in 2023 due to economic pressures. Meanwhile, new construction projects are being delayed as a result of the widening gap between market prices and construction costs, including the impact that higher interest rates have had on financing these projects.

The average residential sale price in the GTA may decrease by up to 11.8 per cent in 2023, with three main trends that will continue into next year, according to Cameron Forbes, RE/MAX Realtron Realty broker: "Continued interest rate increases and associated price adjustments, rising unemployment due to an economic slowdown, and new opportunities to engage in the market for buyers and sellers because of improved affordability. For buyers, this includes having fewer competitors, reduced prices and an increase in choices in the market. Meanwhile, sellers will have a trade-up advantage, reduced competition of listings, a stronger ability to re-locate to the suburbs, and have all of the advantages that buyers do, too." 

"It's important to also consider some key context for the GTA," adds Alexander. "As Canada's largest urban centre, this region in particular has been feeling the effects of feverish demand and a shortage of housing, which resulted in unsustainable price growth and spiraling unaffordability. While recent price adjustments may be hard to swallow for some, what we have here is a return to much more 'normal' market conditions and a moderation that gives consumers the breathing room they need to make a wise decision and investment."

Greater Vancouver Area (GVA), British Columbia

Balanced market conditions in the GVA are anticipated to continue into at least the second quarter of 2023. Move-up and move-over buyers have led consumer demand in the region, with first-time buyers following close behind – a trend that's likely to persist into the beginning of next year.

"A big priority for homebuyers will be weighing value against opportunity in the market, with upsizing being top of mind. On the flip-side first-time homebuyers will be able to take advantage of a cooling market and make offers with conditions," said Tim Hill, RE/MAX All Points Realty agent. "Interestingly, it will be first-time home buyers that will facilitate move-up and move-over buyers to sell their first properties and upsize.  I believe this will be a major factor and growing trend in the GVA real estate in 2023."

Single-detached homes remain the dominant housing type in the area, with the "upsizing" trend expected to become increasingly popular among families in 2023. Desirable neighbourhoods in the city are currently based on location, with access to rapid transit playing a large part in purchasing decisions. A continued drop in condo pricing is expected into 2023, while the luxury market is anticipated to have a slow start to the year before balancing out in the latter half of 2023. The average residential sale price in the GVA is anticipated to decrease by five per cent in 2023.

Calgary, Alberta

Much like Vancouver, Calgary's marked is balanced, but is expected to shift into seller's territory in early 2023. First-time buyers are driving demand in the region, with move-up and move-over buyers trailing close behind – a trend that is expected to continue into 2023.

"First-time buyers dealing with higher interest rates have lowered their expectations and downsized their purchases, going from single-detached homes to duplexes or apartments," said Richard Fleming, from RE/MAX Real Estate Mountain View. "We're seeing first-time buyers that still want to get into real estate, they're just adjusting what that looks like."

The average residential sale price increased by 13 per cent from $585,025 in 2021 (January-December) to $658,277 in 2022 (January-October). Condos are currently the dominant housing type in the region, with single-detached homes expected to drive the majority of sales in 2023, as buyers seek additional living space. Inventory is anticipated to remain low in the first quarter of the year, before steadily increasing through the third quarter and finally sloping down again in the final quarter of 2023.

Home sales are steadily increasing and are expected to remain on the rise in 2023. The luxury market has decreased its pace but is likely to pick back up next year. The average residential sale price in Calgary is anticipated to increase by seven per cent in 2023.

Edmonton, Alberta

Similar to the majority of regions across the country, Edmonton is currently experiencing a balanced market, with demand expected to increase in the spring. Move-up and move-over buyers are driving demand in the region and are expected to continue doing so into 2023. The average residential sale price increased by three per cent from $387,614 in 2021 (January-December) to $401,025 in 2022 (January-October). Single-detached homes remain the dominant housing type.

"We're seeing three main trends this year," said John Carter of RE/MAX River City. "Migration from other provinces, increased demand for luxury residential real estate, and balanced market conditions." New construction developments continue to be pressured by ongoing supply chain challenges and inflationary cost issues. Additionally, limitations on skilled labour are contributing to hurdles experienced by many builders.

Edmonton is expected to weather the recession well, as average incomes in the region are some of the highest in the country, according to Carter. Despite rising interest rates, the majority of buyers have not capped their mortgage capacity. Demand for downtown condos is expected to continue rising in 2023, with demand in the luxury segment becoming more robust in the year ahead. The average residential sale price in Edmonton is anticipated to increase by three per cent in 2023.

Regina, Saskatchewan

Regina is considered a balanced market and is anticipated to remain one in 2023. Move-up and move-over buyers have driven demand in the region and are expected to continue doing so into 2023. The average residential sale price in the region decreased by one per cent from $324,650 in 2021 (January-December) to $320,970 in 2022 (January-October). Single-detached homes remain the dominant housing type in the region.

"The market will remain balanced and steady through 2023 and we do not anticipate a major change in the average residential sale price or number of sales in 2023 as a result," said Jeremy Cosette of RE/MAX Crown Real Estate. "We'll see a lot of similarity to 2022 across the board and although housing supply will likely fluctuate throughout the year, overall, it'll level out and remain unchanged in 2023."

Rising interest rates will likely be a dominant theme in 2023, resulting in a slower market for both buyers and sellers. The average residential sale price in Regina is anticipated to remain the same in 2023.

Winnipeg, Manitoba

Winnipeg is currently sitting in a balanced market, but is expected to shift to a buyer's market early in the year before returning to balance in late 2023. Move-up and move-over buyers continue to drive demand in the region, with single-detached homes remaining the dominant housing type in the region – trends that are both expected to intensify in 2023. The average residential sale price increased by 10 per cent from $386,491 in 2021 (January-December) to $423,680 in 2022 (January-October).

"In 2023 we will continue to see an interest in multifamily sales as well commercial, land assembly and land banking," said RE/MAX Executives Realty broker Akash Bedi. "On the residential side, I think we will see a bit of a slowdown with residential rental unit sales."

Rising interest rates are expected to continue placing pressure on affordability and pre-approval amounts in Winnipeg next year. Unlike the majority of regions, Winnipeg is experiencing an increase in joint family and multi-generational family ownership – which can be attributed to ongoing affordability challenges. The condo market is in line with the changes experienced in the overall market. The average residential sale price in Winnipeg is expected to decrease by 8.5 per cent in 2023.

Ottawa, Ontario

Ottawa is currently defined as a seller's market and it is anticipated to remain one into the third quarter of 2023, where subsequently it is anticipated to become balanced. First-time homebuyers are driving demand in the region due to its relative affordability a trend that is expected to carry on next year. The average residential sale price increased by nine per cent from $601,039 in 2021 (January-December) to $656,761 in 2022 (January-October). Townhomes are currently the most in-demand housing-type due to the accessible entry-point they provide buyers.

"We're seeing three main housing trends heading into 2023," said Laura Keller of RE/MAX Affiliates Realty Ltd. "More multigenerational living, less upward movement as housing prices change and many first-time buyers who will look to engage and enter the market." First-time buyers in Ottawa are particular about the finishes, style and location of their homes, with many not wanting to spend money on small renovations. As single-family dwellings have become unaffordable to rent, multi-residential properties and tiny or coach home conversions are expected to increase. Rising interest rates are anticipated to continue cooling the market in the next year. Supply remains an issue in Ottawa, with many new construction developments being halted due to increased development fees and material and labour shortages. The average residential sale price in Ottawa is anticipated to increase by four per cent in 2023.

Montreal Region, Quebec

The Montreal Region is currently a seller's market, but certain types of properties and areas will be going towards a balanced market. These conditions are anticipated to continue into 2023. Currently, move-up and move-over buyers are driving demand in the region – a trend expected to carry over next year. The average residential sale price increased by 13 per cent year-over-year in Montreal (from $490,000 in 2021 (January-December) to $556,000 in 2022 (January-October).

Single-detached homes are the most in-demand housing type in the Montreal Region. "We'll see three main trends this year," said Patricia Hamelin of RE/MAX du Cartier. "Slower movement in the market, an increase in the amount of move-up buyers and the market continuing to balance out in 2023."

Now in the post-pandemic, housing demand is beginning to balance back to pre-pandemic levels. Rising interest rates are anticipated to continue impacting the housing market in 2023 – specifically by reducing its pace. Supply chain, labour shortages and rising costs of materials and labour have caused new construction developments to become delayed. The luxury market is expected to continue to cool in 2023, thus creating more advantageous opportunities for potential buyers.

Halifax, NS

Halifax is currently a seller's market and it is anticipated to remain one in 2023. Move-up and move-over buyers are driving demand in the region and are expected to continue to do so next year. The city saw an 19 per cent increase in year-over-year residential sale prices from $457,741 in 2021 (January-December) to $542,663 in 2022 (January-October). Single-detached homes remain the most in-demand housing type among buyers. Interest rates rising and inter-provincial migration reducing post-pandemic, contributed to the number of sales in the region decreasing by 25 per cent year-over-year, from 6,588 in 2021 (January-December) to 4,912 in 2022 (January-October).

"Halifax is expected to see strong investor activity in 2023 as prices and returns are still attractive, especially compared to other major cities across the country. Amidst inflation, a looming recession and continued adjustments to interest rates, the year is expected to start slow, but pick up its pace in the second half of 2023," says Ryan Hartlen, broker of RE/MAX Nova.

Supply is anticipated to remain tight in 2023 for Halifax, as buyer demand remains high and the city prepares to welcome a wave of new Canadians. Renting rooms and sharing expenses are ways first-time homebuyers are entering the market in Halifax. The luxury market has experienced additional activity and a recent rise in prices, but overall, this segment is expected to cool in 2023.

The average residential sale price in Halifax is anticipated to increase by eight per cent in 2023.

Additional findings from the 2023 RE/MAX Canada Housing Market Outlook Report brokers and agents:

  • Western Canada
    • In Nanaimo, BC, the Greater Vancouver Area, BC, Kelowna, BC and Winnipeg, MB average residential sale prices are expected to decline by five to 10 per cent in 2023.
    • Victoria, BC, Calgary, AB, Edmonton, AB, and Saskatoon, SK are all expected to see average residential sale prices increase between two to seven per cent in 2023.
    • The average residential sale price is not expected to fluctuate in Regina, SK in 2023.
    • 44 per cent of regions in Western Canada are considered balanced markets, including Victoria, BC, GVA, BC, Edmonton, AB, Regina, SK and Winnipeg, MB.
    • Nanaimo, BC and Kelowna, BC are both considered to be buyer's markets, while Saskatoon, SK, is categorized as a seller's market for single-detached properties and a buyer's market for condominiums; and Calgary, AB, across all property types.
  • Ontario
    • In London, Kitchener-Waterloo, Barrie, the GTA, Durham, and Lakelands West (Georgian Bay area) average residential sale prices are expected to decline by two to 15 per cent in 2023.
    • Sudbury, Hamilton-Burlington, Oakville, Brampton, Ottawa, Mississauga, Muskoka, Niagara, Windsor, York Region, Haliburton, Peterborough and The Kawarthas, and Kingston are all expected to see average residential sale prices increase between two to eight per cent in 2023.
    • 57 per cent of regions in Ontario Canada are considered balanced markets, including London, Kitchener-Waterloo, Oakville, Barrie, GTA, Mississauga, Windsor, Lakelands West and Kingston.
    • Hamilton-Burlington, Brampton, and Niagara are all considered buyer's markets, while Sudbury, Muskoka, Durham York Region, Haliburton, Ottawa and Peterborough and the Kawarthas favour sellers.
  • Quebec
    • In Quebec City, average residential sale prices are expected to decline by 10 per cent respectively.
    • The region of Montreal is balanced in some regions, while Quebec City is a balanced market.
  • Atlantic Canada
    • In Moncton, NB, Saint John, NB and Fredericton, NB, average residential sale prices are expected to decline between 3.5 and five per cent in 2023.
    • Halifax, NS and St. John's, NL are both expected to see average residential sale price increases in 2023, rising eight and four per cent respectively, while sale prices are anticipated to remain unchanged in Charlottetown, PEI.
    • With the exception of St. John's, NL (a balanced market), all regions in Atlantic Canada are considered to favour sellers.

Additional key insights from the Leger survey:

  • Although rising interest rates have cooled/stabilized the real estate market, 45 per cent of Canadians are concerned that further increases will impact their ability to engage in the real estate market in 2023
  • 54 per cent of Canadians believe that the two-year ban on foreign investors purchasing property which will come into effect on Jan. 1, will increase the availability of affordable housing for local homebuyers
  • 15 per cent of Canadians are considering moving to another province in 2023 to find better housing affordability and liveability
  • 54 per cent of Canadians feel confident that their financial situation will remain steady in 2023

About the 2023 Canadian Housing Market Outlook Report:

RE/MAX's 2023 Canadian Housing Market Outlook Report includes data and insights from RE/MAX brokerages. RE/MAX brokers and agents are surveyed on market activity and local developments. The overall outlook is based on the average of all regions surveyed, weighted by the number of transactions in each region.

About Leger

Leger is the largest Canadian-owned full-service market research firm. An online survey of 1,544 Canadians was completed between November 4-6, 2022, using Leger's online panel. Leger's online panel has approximately 400,000 members nationally and has a retention rate of 90 per cent. A probability sample of the same size would yield a margin of error of +/- 2.5 per cent, 19 times out of 20.

About the RE/MAX Network

As one of the leading global real estate franchisors, RE/MAX, LLC is a subsidiary of RE/MAX Holdings (NYSE: RMAX) with more than 140,000 agents in almost 9,000 offices with a presence in more than 110 countries and territories. RE/MAX Canada refers to RE/MAX of Western Canada (1998), LLC and RE/MAX Ontario-Atlantic Canada, Inc., and RE/MAX Promotions, Inc., each of which are affiliates of RE/MAX, LLC. Nobody in the world sells more real estate than RE/MAX, as measured by residential transaction sides.

RE/MAX was founded in 1973 by Dave and Gail Liniger, with an innovative, entrepreneurial culture affording its agents and franchisees the flexibility to operate their businesses with great independence. RE/MAX agents have lived, worked and served in their local communities for decades, raising millions of dollars every year for Children's Miracle Network Hospitals® and other charities. To learn more about RE/MAX, to search home listings or find an agent in your community, please visit remax.ca. For the latest news from RE/MAX Canada, please visit blog.remax.ca.

Forward looking statements
This report includes "forward-looking statements" within the meaning of the "safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "believe," "intend," "expect," "estimate," "plan," "outlook," "project," and other similar words and expressions that predict or indicate future events or trends that are not statements of historical matters. These forward-looking statements include statements regarding housing market conditions and the Company's results of operations, performance and growth. Forward-looking statements should not be read as guarantees of future performance or results. Forward-looking statements are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. These risks and uncertainties include (1) the global COVID-19 pandemic, which has impacted the Company and continues to pose significant and widespread risks to the Company's business, the Company's ability to successfully close the anticipated reacquisition and to integrate the reacquired regions into its business, (3) changes in the real estate market or interest rates and availability of financing, (4) changes in business and economic activity in general, (5) the Company's ability to attract and retain quality franchisees, (6) the Company's franchisees' ability to recruit and retain real estate agents and mortgage loan originators, (7) changes in laws and regulations, (8) the Company's ability to enhance, market, and protect the RE/MAX and Motto Mortgage brands, (9) the Company's ability to implement its technology initiatives, and (10) fluctuations in foreign currency exchange rates, and those risks and uncertainties described in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission ("SEC") and similar disclosures in subsequent periodic and current reports filed with the SEC, which are available on the investor relations page of the Company's website at www.remax.com and on the SEC website at www.sec.gov. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made. Except as required by law, the Company does not intend, and undertakes no duty, to update this information to reflect future events or circumstances.

 

SOURCE RE/MAX Canada

Read More

Continue Reading

Uncategorized

Stay Ahead of GDP: 3 Charts to Become a Smarter Trader

When concerns of a recession are front and center, investors tend to pay more attention to the Gross Domestic Product (GDP) report. The Q4 2022 GDP report…

Published

on

When concerns of a recession are front and center, investors tend to pay more attention to the Gross Domestic Product (GDP) report. The Q4 2022 GDP report showed the U.S. economy grew by 2.9% in the quarter, and Wall Street wasn't disappointed. The day the report was released, the market closed higher, with the Dow Jones Industrial Average ($DJIA) up 0.61%, the S&P 500 index ($SPX) up 1.1%, and the Nasdaq Composite ($COMPQ) up 1.76%. Consumer Discretionary, Technology, and Energy were the top-performing S&P sectors.

Add to the GDP report strong earnings from Tesla, Inc. (TSLA) and a mega announcement from Chevron Corp. (CVX)—raising dividends and a $75 billion buyback round—and you get a strong day in the stock markets.

Why is the GDP Report Important?

If a country's GDP is growing faster than expected, it could be a positive indication of economic strength. It means that consumer spending, business investment, and exports, among other factors, are going strong. But the GDP is just one indicator, and one indicator doesn't necessarily tell the whole story. It's a good idea to look at other indicators, such as the unemployment rate, inflation, and consumer sentiment, before making a conclusion.

Inflation appears to be cooling, but the labor market continues to be strong. The Fed has stated in many of its previous meetings that it'll be closely watching the labor market. So that'll be a sticky point as we get close to the next Fed meeting. Consumer spending is also strong, according to the GDP report. But that could have been because of increased auto sales and spending on services such as health care, personal care, and utilities. Retail sales released earlier in January indicated that holiday sales were lower.

There's a chance we could see retail sales slowing in Q1 2023 as some households run out of savings that were accumulated during the pandemic. This is something to keep an eye on going forward, as a slowdown in retail sales could mean increases in inventories. And this is something that could decrease economic activity.

Overall, the recent GDP report indicates the U.S. economy is strong, although some economists feel we'll probably see some downside in 2023, though not a recession. But the one drawback of the GDP report is that it's lagging. It comes out after the fact. Wouldn't it be great if you had known this ahead of time so you could position your trades to take advantage of the rally? While there's no way to know with 100% accuracy, there are ways to identify probable events.

3 Ways To Stay Ahead of the Curve

Instead of waiting for three months to get next quarter's GDP report, you can gauge the potential strength or weakness of the overall U.S. economy. Steven Sears, in his book The Indomitable Investor, suggested looking at these charts:

  • Copper prices
  • High-yield corporate bonds
  • Small-cap stocks

Copper: An Economic Indicator

You may not hear much about copper, but it's used in the manufacture of several goods and in construction. Given that manufacturing and construction make up a big chunk of economic activity, the red metal is more important than you may have thought. If you look at the chart of copper futures ($COPPER) you'll see that, in October 2022, the price of copper was trading sideways, but, in November, its price rose and trended quite a bit higher. This would have been an indication of a strengthening economy.

CHART 1: COPPER CONTINUOUS FUTURES CONTRACTS. Copper prices have been rising since November 2022. Chart source: StockCharts.com. For illustrative purposes only.

High-Yield Bonds: Risk On Indicator

The higher the risk, the higher the yield. That's the premise behind high-yield bonds. In short, companies that are leveraged, smaller, or just starting to grow may not have the solid balance sheets that more established companies are likely to have. If the economy slows down, investors are likely to sell the high-yield bonds and pick up the safer U.S. Treasury bonds.

Why the flight to safety? It's because when the economy is sluggish, the companies that issue the high-yield bonds tend to find it difficult to service their debts. When the economy is expanding, the opposite happens—they tend to perform better.

The chart below of the Dow Jones Corporate Bond Index ($DJCB) shows that, since the end of October 2022, the index trended higher. Similar to copper prices, high-yield corporate bond activity was also indicating economic expansion. You'll see similar action in charts of high-yield bond exchange-traded funds (ETFs) such as iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and SPDR Barclays High Yield Bond ETF (JNK).

CHART 2: HIGH-YIELD BONDS TRENDING HIGHER. The Dow Jones Corporate Bond Index ($DJCB) has been trending higher since end of October 2022.Chart source: StockCharts.com. For illustrative purposes only.

Small-Cap Stocks: They're Sensitive

Pull up a chart of the iShares Russell 2000 ETF (IWM) and you'll see similar price action (see chart 3). Since mid-October, small-cap stocks (the Russell 2000 index is made up of 2000 small companies) have been moving higher.

CHART 3: SMALL-CAP STOCKS TRENDING HIGHER. When the economy is expanding, small-cap stocks trend higher.Chart source: StockCharts.com. For illustrative purposes only.

Three's Company

If all three of these indicators are showing strength, you can expect the GDP number to be strong. There are times when the GDP number may not impact the markets, but, when inflation is a problem and the Fed is trying to curb it by raising interest rates, the GDP number tends to impact the markets.

This scenario is likely to play out in 2023, so it would be worth your while to set up a GDP Tracker ChartList. Want a live link to the charts used in this article? They're all right here.


Jayanthi Gopalakrishnan

Director, Site Content

StockCharts.com

 

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

Read More

Continue Reading

Uncategorized

Hotels: Occupancy Rate Down 6.2% Compared to Same Week in 2019

From CoStar: STR: MLK Day Leads to Slightly Lower US Weekly Hotel PerformanceWith the Martin Luther King Jr. holiday, U.S. hotel performance came in slightly lower than the previous week, according to STR‘s latest data through Jan. 21.Jan. 15-21, 2023 …

Published

on

With the Martin Luther King Jr. holiday, U.S. hotel performance came in slightly lower than the previous week, according to STR‘s latest data through Jan. 21.

Jan. 15-21, 2023 (percentage change from comparable week in 2019*):

Occupancy: 54.2% (-6.2%)
• Average daily rate (ADR): $140.16 (+11.3%)
• evenue per available room (RevPAR): $75.97 (+4.4%)

*Due to the pandemic impact, STR is measuring recovery against comparable time periods from 2019. Year-over-year comparisons will once again become standard after Q1.
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four-week average.

Click on graph for larger image.

The red line is for 2023, black is 2020, blue is the median, and dashed light blue is for 2022.  Dashed purple is 2019 (STR is comparing to a strong year for hotels).

The 4-week average of the occupancy rate is below the median rate for the previous 20 years (Blue), but this is the slow season - and some of the early year weakness might be related to the timing of the report.

Note: Y-axis doesn't start at zero to better show the seasonal change.

The 4-week average of the occupancy rate will increase seasonally over the next few months.

Read More

Continue Reading

Uncategorized

American Express Numbers Show What Still Gets People to Spend Money

American Express stock jumped nearly 12% since earnings dropped.

Published

on

American Express stock jumped nearly 12% since earnings dropped.

Even though American Express  (AXP) - Get Free Report earnings announced Friday afternoon fell somewhat short of expectations for the quarter, shares still soared to highs unseen for many months due to a number of strong metrics -- quarterly revenue growth of 17%, plans to raise its dividend by 15% from 52 to 60 cents and an annual revenue that surpassed $50 billion for the first time ever.

At $52.9 billion, the latter is driven primarily by an increase in quarterly member spending. Last year, that number was at $42.4 billion. 

According to American Express Chairman and CEO Stephen J. Squeri, the increase can be attributed to higher numbers of millennials gaining in earning power and using their AmEx above other cards to tap into rewards as many approach milestones like marriage, career advancement, and homeownership.

"Millennial and Gen Z customers continue to be the largest drivers of our growth, representing over 60% of proprietary consumer card acquisitions in the quarter and for the full year," Squeri said in an earnings call discussing the results.

People Are Using Their AmEx Cards a Lot

The $52.9 billion number is up 25% from what was seen last quarter and reflects a number of different factors also having to do with post-pandemic spending.

"We ended 2022 with record revenues, which grew 25% from a year earlier, and earnings per share of $9.85, both well above the guidance that we provided when we introduced our long-term growth plan at the start of last year, despite a mixed economic environment," Squeri said.

AmEx further reported that 12.5 million new members signed up for cards in 2022 while existing members used their cards frequently. Fourth-quarter sales at AmEx's U.S. consumer services and commercial segments rose by a respective 23% and 15%.

But higher expenses also led to falling below analyst expectations. The fourth-quarter income of $1.57 billion, or $2.07 a share, is down from $1.72 billion ($2.18 a share) in the fourth quarter of 2021. FactSet analysts had predicted $2.23 a share.

"I'm not sure what that's really a function of right now -- whether it's a function of the economy or of confusion on where to advertise right now," Squeri told Yahoo Finance in reference to lower spending on the part of small business and digital advertisers. "We're going to watch that, but the consumer is really strong, travel bookings are up over 50% vs pre-pandemic."

Shutterstock

It's a Good Time to Be Tracking Credit Card Companies

Immediately after the earnings dropped, AmEx stock started soaring and was up nearly 12% at $175.24 on Friday afternoon. This is a high unseen in months -- the last peak occurred when, on September 12, shares were at $162.45. 

Whether due to or despite analyst threats of a looming recession, people have been using their credit cards very actively throughout the end of 2022.

When it posted its earnings earlier this week, Mastercard  (MA) - Get Free Report surpassed Wall Street expectations of $5.8 billion and $2.65 per share in fourth-quarter earnings. Visa  (V) - Get Free Report also saw revenue rise 11.8% to $7.94 billion in the same quarter. The numbers also reflect higher numbers of people traveling and using their credit cards in different countries.

"Visa's performance in the first quarter of 2023 reflects stable domestic volumes and transactions and a continued recovery of cross-border travel," outgoing CEO Al Kelly said of the results during a call with financial analysts.

Read More

Continue Reading

Trending