Real Estate Softening: Market Commentary
Clint Carpenter, Director of Operations
2022 has continued its volatile streak with swings both up and down. The NASDAQ has seen the most action and is currently down just over 22% YTD. The more broad S&P 500 is down 15% YTD and the DOW sits at negative 11% so far this year.
Treasuries continue to move around, the 1-year is currently paying 2.9%, and the 10-year is yielding 2.7%. We saw the average rate for a 30-year mortgage go briefly over 6% last month, but it has settled now around 5.4%.
The price of gold has retreated a healthy amount, currently at $1,754/oz. The price of brent crude oil has also dropped, although it has recovered somewhat to about $107/bbl.
Kris Venezia, Market Analyst
I want to talk about some of the commentary we're getting from businesses when it comes to inflation. There's some early positive signs. I want to emphasize early. Commodity prices have declined from extreme highs. Commodity prices filter into a lot of this economy, with food and gas being the two obvious ones. We are also getting some positive deflationary commentary from a few retailers. Walmart and Target have noted big inventory build ups with electronics and clothes. They're marking those items down. It hurts the stock price, but if you've been waiting to buy a TV or were thinking of getting a jump on those fall/winter clothes, now is a good time to look for deals in those areas. That's the positive. The negative is we still have companies talking about trying to "take price." Take price is a nice way of saying, "We're raising prices." Coca-Cola, Pepsi, McDonald's and Chipotle have all recently discussed continuing to raise prices in the back half of 2022. The tech sector and industrial companies fall into the negative camp as well. Honeywell has discussed raising prices which squeezes the numerous businesses they work with around the world. 3M is another one who has pointed to more price increases in the second half of 2022. Microsoft, on the tech side, recently talked about future price increases with their products. So while we're seeing some positives in commodity prices and retailers, there's still negatives and headwinds facing the economy with inflation.
Daryl Eckman, President
The real estate market is seeing signs of slow down. I have been keeping my eyes on that. I think that will be an area to have concern. It will have a big impact and could be another negative in the economy. Real estate has an impact on the economy because it involves so many different aspects. I've been reading data from realtors to investment groups, and there's clearly been a leveling off in real estate prices. We are seeing signs of inventory building up in the housing market. We are also seeing some buyers drop out because of the higher cost of a mortgage with higher rates. There's also evidence of people deciding not to buy a home for fear of buying into or before a downturn. I hate to anticipate or forecast the housing market, but we are prepared for a scenario where real estate gets hit. We are sitting with a lot of cash in the portfolios. We have also started to do a little bit of short term bond buying. We're holding and staying conservative with the economy sitting the way it is. We are asking you to be patient as we manage risk with the economy in a tricky spot.
I think by this time of the year, especially when markets are down, there can be a great deal of burn out among investors when it comes to talking about the stock market or the economy. Rest assured that we’ve got our eagle eyes on the markets and your portfolios.
During this time of year, however, it’s a great time to start taking advantage of some of the other things we do here at Eckman Wealth Management. The third-quarter is a great time to start looking at your tax situation for the year, seeing if there is any room for capital gain efficiencies, or maybe planning for some Roth conversions, or even just making sure you’re withholding enough from your salary or portfolio distributions.
It’s also a good time for those of you over or near the age of 65 to start thinking about Medicare, whether it’s signing up for the first time or just reviewing what you currently have.
Also, It’s always a good time to think about your estate plan, but especially now in late summer when you might have a bit more time on your hands to get it taken care of. Do you have a trust? Is it up-to-date? How about your powers of attorney should something happen to you or your family?
These are all things you can lean on us for assistance with. Not to mention just any sort of one-off financial question you can think of, like, “Should I buy or lease a car, or is it time to sell a property,” etc. We enjoy working through these types of questions for you and encourage you to reach out with anything we can help you with.