Sizing Up the U.S. Housing Market, From Hot to Not

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Jersey and Florida are hot. Austin and Seattle are not. On Tuesday, home builder

Lennar
’s
co-CEO Richard Beckwitt on an earnings call provided a tour of U.S. housing markets. “So far in June, new orders, traffic, sales incentives, and cancellations have worsened in many of our markets due to a rapid spike in mortgage rates and headwinds from negative economic headlines,” he said. Some markets have also seen seasonal slowdowns.

Beckwitt listed 18 well-performing markets benefiting from low inventory, strong local economies, solid growth, and in-migration. “These include our six Florida markets, New Jersey, Maryland, Charlotte, Indianapolis, Chicago, Dallas, Houston, San Antonio, Phoenix, San Diego, Orange County, and [California’s] Inland Empire,” he said.

Ten markets are in Category 2, with modest declines: Atlanta, Colorado, Charleston, Myrtle Beach, Nashville, Philadelphia, Virginia, the Bay Area, Reno, and Salt Lake City. “In each of these markets, traffic has slowed, and we’ve seen an uptick in cancellation rates,” he said.

Then there are the seven in Category 3—locales with “more significant market softening and correction.” On the list: Raleigh, Minnesota, Austin, Los Angeles, California’s Central Valley, Sacramento, and Seattle. Austin had seen 40%-plus appreciation for two years, and Seattle was a top U.S. market, he said. Minnesota has been hurt by a lack of immigration, limiting the home-buyer pool.

As for Lennar itself, its quarterly earnings ended in May were better than expected, and its shares closed 11.3% higher for the week at $71.79, but are down 38% for the year.

Last Week

Sentiment Upgrade

Monday was a holiday: Juneteenth. Stocks advanced on Tuesday after a rough June, but slipped as Federal Reserve Chairman Jerome Powell warned of recession in congressional testimony. But then, as key commodities like copper fell, and the Fed crowd talked, sentiment improved and indexes rallied on the belief that the Fed might go easier on rates. The result: the first weekly gains in a month. On the week, the

Dow Jones Industrial Average
rose 5.4% to 31,503.71; the

S&P 500
surged 6.4% to 3912.15; and the

Nasdaq Composite
soared 7.49% to 11,607.62.

Crypto Chill

Bitcoin
fell to $17,628 over the weekend, stirring fears of leveraged crypto bets forced to liquidate. Crypto hedge fund Three Arrows Capital failed to make margin calls and a key stablecoin,

Tether,
came under pressure. Bitcoin rebounded over $21,000 as the correlation with tech stocks faded. Crypto exchange FTX bailed out struggling crypto lender BlockFi with a $250 million credit line.

Gas, Guns, Jurisprudence

President Biden asked Congress for a three-month gas and diesel tax holiday. The tax amounts to 18.4 cents a gallon for gas, 24.4 cents for diesel. Critics say the step will encourage driving and inflation. Separately, Congress passed the gun bill, even as the Supreme Court blocked New York State limits on carrying guns in public. A day later, the court struck down Roe v. Wade, 6-3.

The Banks Test Out

With recession in the air, the Fed released results of stress tests, passing all 33 banks. The banks can begin releasing details of new dividend and buyback policies on Monday.

Ukraine Rope-a-Dope

Ukraine pulled back from Severodonetsk, as Russian forces inched forward. Ukraine continued its counteroffensive in the south as both sides neared exhaustion. Russia continued to cut gas supplies to Europe. Germany reopened coal-fired plants and signed a deal with U.S. natural-gas supplier Venture Global. Russia threatened Lithuania, which said it would block sanctioned goods moving across the country to the Russian enclave of Kaliningrad, and ran simulated missile strikes near Estonia. The EU accepted Ukraine for candidate status.

Annals of Deal Making

JetBlue

upped its offer for

Spirit Airlines

to $33.50 a share as Spirit weighed a competing bid from Frontier Group…

Mondelez

said it would acquire Clif Bar for at least $2.9 billion…

Kellogg

announced it was splitting into three: the snack-food business (Pringles, Cheez-It, Pop-Tarts), which generates 80% of sales; the cereal business, its original 116-year-old business; and a unit selling plant-based food (Gardenburger, Morningstar Farms)…

Zendesk

said on Friday that it agreed to be acquired by a buyout group that includes Hellman & Friedman and Permira for $10.2 billion. The software firm had been talking truce with activist Jana Partners and had said it wouldn’t sell…The Food and Drug Administration banned Juul vaping products in the U.S.

Altria

Group invested $12.8 billion for 35% of Juul in 2018; it has since written that down to $1.7 billion. Altria fell 4.2% for the week.

Write to Andrew Bary at [email protected]