One of the reasons house prices may remain high

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By Julia Horowitz, CNN Business

Last month before the bell observed the first signs that the scorching global housing market could start to cool, as high prices seemed to hurt demand and home improvement spending eased.

We may have called the summit too early.

What’s happening: US home prices rose 18.6% in June from a year earlier and 16.8% from May, according to the published S&P Corelogic Case-Shiller Index this week. In Phoenix, home prices jumped 29% year-over-year, while San Diego saw a 27% increase.

This is the third consecutive month that the rate of increase in house prices has broken a record.

In the UK, annual house price growth rose to 11% in August from 10.5% in July, according to new data from the Nationwide Building Society. Prices rose 2.1% month-over-month, the second largest monthly increase in 15 years.

In Australia, although there are signs of the housing boom slowing, home values rose another 1.5% in August, according to CoreLogic’s latest home value index. This growth rate remains “well above average,” CoreLogic said. The Reserve Bank of New Zealand, for its part, recently declared house prices “above sustainable levels”.

The payoff: Low borrowing costs and work-from-home upgrades still support demand, though some potential buyers scoff at the magnitude of recent price increases.

Yet in a research note released this week, Goldman Sachs pointed to another factor.

“While low mortgage rates and the shift to working from home are also fueling demand for housing, one of the underestimated reasons for the price spikes is that housing supply is very limited,” economists said. of the investment bank.

Price increases would normally fuel a boom in new home construction. But that did not materialize, due to shortages of raw materials and labor, as well as land regulations, according to Goldman.

“While the alleviation of temporary bottlenecks, such as material constraints and pandemic effects on labor supply, should support a possible upturn in supply… United States, Canada and United Kingdom -Uni, ”predicted the bank.

In short: Even if demand starts to weaken, supply issues could support prices for some time.

Oil holds nearly $ 72 a barrel after OPEC meeting

Major oil producers are staying the course and will only gradually increase oil production as demand picks up.

The latest: The Organization of the Petroleum Exporting Countries and its allies, including Russia, confirmed Wednesday that they will implement a plan announced in July to add 400,000 barrels per day to the market each month.

“While the effects of the Covid-19 pandemic continue to cause some uncertainty, market fundamentals have strengthened and [developed country] stocks continue to fall as the recovery accelerates, ”the group said in a statement.

The news stands Oil price near multi-year highs. Futures on Brent crude, the global benchmark, were last trading near $ 72 a barrel.

OPEC’s move could frustrate the Biden administration, which last month called on the cartel to do more to tackle rising energy prices. National Security Advisor Jake Sullivan has warned that rising gas prices “risk harming the ongoing global recovery” and said OPEC must step up its efforts. This is not the case.

That said: Prices are expected to come down over the next few months as production resumes, even if the drops don’t happen as quickly as the White House would like.

“Since this policy is unchanged, we continue to expect that the gradual return of OPEC + oil supply over the coming year will put downward pressure on prices,” he said. Caroline Bain, chief commodity economist at Capital Economics, told clients on Wednesday. She predicts that the price of Brent will drop to $ 60 a barrel by the end of 2022.

Why Wall Street is afraid of September

Buckle up. Markets are on the rise, but we are only at one trading session in September – traditionally the worst month of the year for actions.

On average, September saw the S&P 500 fall by about 0.5%, reports my CNN Business colleague Paul R. La Monica. For the past half century, stocks have tended to increase every two months, with the exception of February.

Time Machine: September 2020 lived up to the bad reputation of the month. The S&P 500 fell almost 4% this month last year.

Of course, that turned out to be just a brief moment in the explosive post-Covid lockdown rally. The S&P 500 is up seven straight months, which LPL Financial’s Ryan Detrick says is one of the longest winning streaks on record.

What could change: The Federal Reserve has a political meeting later this month. Fed Chairman Jerome Powell reassured investors last week that the central bank will not cut – or cut – its bond buying program too soon. Still, investors will be watching Powell’s every word for new clues. The spread of the Delta variant of Covid-19 is also a big variable.

With the markets, seasonality rarely matters, but it’s worth watching during a historically hectic month.

Following

American Eagle Outfitters and Hormel Foods publish their results before the US markets open. Broadcom follows after the close.

Also today: Initial U.S. jobless claims for last week arrive at 8:30 a.m. ET.

Coming tomorrow: the official US employment report for August. Economists polled by Reuters predict that 728,000 jobs were created last month.

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