Perspectives Blog

What’s behind the weakness in U.S. housing?

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | March 24, 2014

Existing U.S. home sales have been weak across all regions and this weakness pre-dates this year’s tough winter. Skyrocketing home prices, the surge in interest rates, and meager income growth have hit affordability and dented demand. Housing is no longer the accelerator for economic growth that it was earlier in the cycle. While the jury is out on just how much cold weather has impacted economic activity in recent months, we should keep in mi…

Missing links and multipliers

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | June 9, 2014

Several forces are colliding now and causing a downshift in the trajectory of the U.S. housing recovery. Household formations remain at multi-year lows due in large part to mediocre income and job gains in combination with high student loan debt by 25 – 45 year old homebuyers. Fewer homeowners mean missing multipliers for growth. As a result, housing will prove less of an accelerator for economic growth in the period ahead. Having witnessed a…

Room to run

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | September 15, 2014

…ading), but these have rarely caused recessions at least in the last few decades. Excesses need to be large and the associated adjustments need to impact a broad swath of the economy. We can point to the lethal combination of housing, credit and leverage in the last recession. Excessive investment was a contributing factor in the 2001 recession. The third category follows an extended period of Fed tightening in response to an overheating economy…

Half-time report on the U.S. consumer

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | July 28, 2014

…on has helped consumer pocketbooks. An exception to the slower growth trends within these latter two spending categories is health care (pharma and physician services), where real purchases are increasing about 2.5%, and also housing-related categories (furniture, building materials) which have climbed about 8% annually on the housing recovery. Consumption trends (real personal consumption expenditure) tend to be driven by the 87% share of non-du…

Special report – 2014 mid-year review and outlook

Columbia Management, Investment Team | June 16, 2014

…improvement in underlying economic trends. Cold weather and an inventory correction were blamed for most of the decline, and the reversal of these drags will temporarily lift second quarter growth to above trend. Importantly, housing has become less of an accelerator for the recovery, as affordability was dented due to higher interest rates and home prices. Consumer spending appears steady, although consumers appear less inclined to add to debt,…

Apparel retail doldrums

Mari Shor, Senior Equity Analyst | August 11, 2014

…spending to outpace real wage growth may make it difficult to close the gap between the haves and have-nots. On the other hand, higher income consumers have enjoyed the financial and psychological benefit of rising stock and housing markets. With household net worth up 35% since the 2009 trough, consumer confidence has risen close to its long-term average, and consumers have indicated increased willingness to reduce their savings and take on deb…

Global asset allocation outlook (as of March 2014)

Columbia Management Global Asset Allocation Team, | April 7, 2014

…first quarter rising about 5%-7%. In a complete reversal from last year’s trend, commodities also rallied in the first quarter. The U.S. economy experienced a slowdown partly attributed to weather, but also due to softness in housing and payback from a very strong inventory cycle in the second half of 2013. In addition, geopolitical fears intensified with Russia’s incursion into Ukraine and nervousness about the shadow banking system in China res…