Historically, the summer months are the busy months for the housing market. The kids are out of school, and the work atmosphere can be a little more relaxed with everyone on vacation. This year is turning out a bit different as schools are not opening, and most of us are working from home. Are these challenges holding back the housing market?
Sales of existing homes jumped by 20.7% in June from the slump in May, according to the National Association of Realtors. This was the most significant monthly increase since the group began tracking and reporting the figure in 1968; however, sales were still 11.3% lower than the same period in 2019. Housing construction increased 17.3% in June as some states reopened; however, we are still trailing the rate from last year. Housing permits have increased year over year by 2.1% to 1.24 million units. Housing permits are a future indicator which is pointing to positive growth of housing starts.
Prior to COVID19, urbanization was the trend. The younger generation was embracing urban living by living and working in large, prosperous cities. COVID19 almost immediately reversed this trend. People are migrating from cities to the suburbs. This is going to have a devastating impact on real estate values in cities. Cities are not going to disappear; however, prices will need to go down to entice buyers.
ETF of the Week: iShares Core Small-Cap IJR
iShares Core Small Capitalized ETF (IJR)was the best performing ETF last week at 2.21%. That makes it the best performing ETF for the last two weeks. IJR invests in companies with a market capitalization of $600 million to $2.4 billion. Small Capitalized Stocks are known for being much more volatile than the bigger cousins S&P 500 ETF (SPY). Companies in SPY must have a market capitalization of at least $8.2 billion.