PUBLISHED BY LAURENT MAUREL | JUL 7, 2023 |
The US economy continues to send out very mixed signals.
The number of bankruptcies in the United States has risen sharply in recent weeks:
This confirms that more and more companies are beginning to suffer from rising interest rates, which are making refinancing more difficult.
Nevertheless, some economic sectors remain euphoric.
This is particularly true for cruises, a key sector of the tourism industry.
Carnival posted record figures this quarter. The sector leader has seen its share price double since March:
American new home builders are also among the big winners in the latest market boom. Builder stocks are even outperforming technology stars:
Manufacturers benefit from two windfall effects:
Raw material prices have plummeted in recent weeks, boosting margins. In this respect, the situation is nothing like last year.
Sales of older homes have collapsed, and as this is the main competitive market, demand is moving exclusively to new homes.
The market for older homes has collapsed for a very simple reason: homeowners bought at fixed rates that were much lower than current rates, and since rates have risen sharply, there is now no incentive for these homeowners to move. According to the Redfin Institute, 82.4% of homeowners have a mortgage rate of less than 5%, and 62% have a rate of less than 4%. 23.5% of homeowners even have a mortgage rate below 3%! The Fed's rate hike has broken the market for older homes, and is the main factor supporting the market for new homes.
The real estate situation is different in other countries.
In the UK, 800,000 homeowners will see their fixed rates expire by the end of the year, then 1.6 million by the end of 2024. Their repayments will literally explode with the new mortgage rates. The supply of older homes is also likely to increase. The same is true in Canada, where variable-rate financing is far more important than in the United States.
In Australia, over the next six months, no fewer than 880,000 homeowners will have to switch from a fixed rate to a variable rate. Next year, a further 450,000 loans will expire. At current rates, a household with a $1 million loan will have to pay an extra $2,000 a month, or $24,000 a year, to meet repayments with its bank.
This time, the real estate situation is much more fragile in the rest of the world than in the United States.
Overall, the US economy is currently outperforming the rest of the world. China, in particular, has been underperforming since April, with economic surprise indices down significantly, while these indicators are on the rise again in the United States:
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