U.S. homebuilding increased more than expected in April and activity in the prior month was stronger than initially thought, suggesting declining mortgage rates were starting to provide some support to the struggling housing market.

Land and labor shortages, however, continue to constrain builders’ ability to construct more lower priced houses. This segment has experienced an acute shortage of inventory, holding back home sales. Investment homebuilding has contracted for five straight quarters.

Housing starts rose 5.7% to a seasonally adjusted annual rate of 1.235 million units last month, driven by gains in the construction of both single- and multi-family housing units, the Commerce Department said on Thursday. Groundbreaking was also likely boosted by drier weather in the Midwest.

Data for March was revised up to show homebuilding rising to a pace of 1.168 million units, instead of falling to a rate of 1.139 million units as previously reported.

The government revised the seasonally adjusted data back to January 2014. The unadjusted series will be revised in July.

Building permits rose 0.6% to a rate of 1.296 million units in April. Building permits had declined for three straight months. Permits for single-family housing, however, fell for a fifth straight month, likely reflecting the supply challenges.

Economists polled by Reuters had forecast housing starts would increase to a pace of 1.205 million units in April.

The 30-year fixed mortgage rate has dropped to 4.10% from a peak of about 4.94% in November, according to data from mortgage finance agency Freddie Mac. Decreasing mortgage rates reflect a recent decision by the Federal Reserve to suspend its three-year monetary policy tightening campaign.

Strong labor market

Relatively cheaper home loans and a strengthening labor market, characterized by the lowest unemployment rate in nearly 50 years, are underpinning demand for housing. In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits dropped 16,000 to a seasonally adjusted 212,000 for the week ended May 11.

The robust job market should underpin the economy as the boost from the White House’s $1.5 trillion tax cut package fades and President Donald Trump’s escalating trade war with China disrupts supply chains at factories, which are already struggling with an inventory bloat that has cut production.

A survey on Wednesday showed confidence among homebuilders rose to a seven-month high in May. While lower borrowing costs are boosting demand, builders said they “continue to deal with ongoing labor and lot shortages and rising material costs that are holding back supply and harming affordability.”

The housing market has been mired in a soft patch since last year. Investment in homebuilding contracted at a 2.8% annualized rate in the first quarter.

Prices of U.S. Treasuries fell after the release of the data while the dollar rose to a session high against a basket of currencies. U.S. stock index futures were trading higher. Last month, single-family homebuilding, which accounts for the largest share of the housing market, increased 6.2% to a rate of 854,000 units. Single-family homebuilding surged in the Midwest, which had suffered flooding in prior months. Single-family starts also rose in the Northeast and West, but fell in the South, where the bulk of homebuilding occurs.

Permits to build single-family homes dropped 4.2% to a rate of 782,000 units in April.

Starts for the volatile multi-family housing segment advanced 4.7% to a rate of 381,000 units last month. Permits for the construction of multi-family homes rebounded 8.9% to a pace of 514,000 units last month.
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Turkey needs to put a comprehensive and credible economic plan in place if it is to avoid another cut to sovereign credit rating, a senior Moody’s sovereign analyst said on Thursday.

New analysis from the rating agency shows Turkey’s recession, the slump in the lira, upcoming refinancing pressures and dwindling reserves have pushed it to right near the top of its worldwide external vulnerability index.

“Failure to put forward a credible broad-based plan to address the structural issues, and in the near-term dampen the market volatility pressure on the lira…that would be a pressure point from a rating perspective,” Moody’s Managing Director of Sovereign Risk, Yves Lemay, told Reuters.

Moody’s downgraded Turkey to Ba3 – three rungs into junk territory – last August, but it also kept it on a ‘negative’ outlook which is a warning that another cut could happen in 12-18 months.

It gives it some time and one of Turkey’s main plusses is that it has a low debt-to-GDP level of about 30 percent, but the likelihood is that an economic plan would be laid out after Istanbul’s mayoral elections have been re-run on June 23.

“For us, the critical issue is whether this administration has the capacity to move aside the political issues and focus on the economic needs of the country,” Lemay said, adding that the repeat of the Istanbul vote had underscored concerns.

“It is another manifestation of the domestic political risk in this instance, and the weakening of the institutions of the country.”

With regards to the drop in currency reserves, he added: “When we look at the size of what [sovereign and bank debt] is coming due in the next year against the size of the reserves, it is a signal of significant vulnerability.”

“The amount of reserves is very much insufficient to refinance the external obligations.”

Moody’s calculates the Turkish government’s interest payments rose 30.4% in nominal terms last year and almost 50% in the first three months of 2019 due to the weak lira and a rise in payments.

As a result it expects interest payments to increase to around 8.2% of the government’s revenue in 2019 from only 5.9% in 2017, “eroding” the government’s fiscal strength.
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The costs seem to be mounting in the U.S. from President Donald Trump’s tit-for-tat trade tariff war with China, both for farmers whose sales of crops to China have been cut and U.S. consumers paying higher prices for imported Chinese products.

The government said Wednesday that to date it has paid out more than $8.5 billion to American farmers to offset their loss of sales to China and other trading partners because of foreign tariffs imposed by Beijing and other governments.

Trump last year pledged up to $12 billion in aid to farmers — chiefly soybean, wheat and corn growers, and those who raise pigs. Trump says he could ask Congress for another $15 billion if U.S. farmers continue to be hurt by China’s tariffs of as much as 25%  on U.S. agricultural imports.

The U.S. had been shipping $12 billion worth of soybeans a year to China, but Beijing’s imposition of the tariff severely cut down on the U.S. exports as China bought the beans from other countries.

Trump said Tuesday on Twitter, “Our great Patriot Farmers will be one of the biggest beneficiaries of what is happening now. Hopefully China will do us the honor of continuing to buy our great farm product, the best, but if not your Country will be making up the difference based on a very high China buy. This money will come from the massive Tariffs being paid to the United States for allowing China, and others, to do business with us. The Farmers have been ‘forgotten’ for many years. Their time is now!”

White House economic adviser Larry Kudlow acknowledged to a television interviewer last weekend that “to some extent” U.S. consumers will bear the brunt of higher costs on Chinese goods after Trump’s tariffs have been levied on the imported goods.

Trade Partnership Worldwide, a Washington economic consulting firm, estimates in a new study the typical American family of four people would pay $2,300 more annually for goods and services if Trump imposes a 25% tariff on all Chinese imports, as he says he is considering.

Such higher tariffs would hit an array of Chinese-produced consumer goods — clothing, children’s toys, sports equipment, shoes and consumer electronics — that are widely bought by Americans.

If that does not happen, but the existing U.S. tariffs remain in place, the research group says the average U.S. family would pay $770 in higher costs each year.

The U.S. imported almost $540 billion in Chinese goods in 2018, while the U.S. exported $120 billion, a trade imbalance that Trump is seeking to even out with imposition of the tariffs. The U.S. exported almost $59 billion in services to China, while importing only $18 billion, but services are not directly affected by tariffs.
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Ford Motor Co plans to start production of new luxury Lincoln models in China for that market as they are launched, starting with the new Corsair later this year, to benefit from lower costs and avoid the risk of tariffs, a top executive said Monday.

“It’s a huge, huge opportunity for Lincoln because we see China as ground zero for Lincoln given the size of the market and how well the brand has been received,” Chief Financial Officer Bob Shanks said at a Goldman Sachs conference in New York.

Ford has lower levels of localized production than rivals General Motors Co or Volkswagen AG, who make more vehicles in China for Chinese consumers, benefiting from lower labor and material costs, and avoiding tariffs in the burgeoning trade war between the United States and China.

Shanks said all new Lincoln models, with the exception of the Navigator assembled in Louisville, Kentucky, will also be produced in China.

He declined to say how much Ford will save through localized production.

Ford has been struggling to revive sales in China, the automaker’s second-biggest market. Ford sales slumped 37 percent in 2018, after a 6 percent decline in 2017.

Shanks said that all of the problems the automaker experienced in China last year were related to the Ford brand, not Lincoln, which is popular with Chinese customers.
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The typical routines of life on a family farm carry a heavier burden these days for Pam Johnson.

“First thing I do is make a pot of coffee,” she told VOA in an interview in one of the cavernous sheds that contain her green and yellow John Deere farming equipment. Once she has that coffee, she “(goes) to the computer and look at what grain prices have done overnight and usually do a gut clutch, because they’ve been going down. They’re at five-month lows.”

Driven there in part by retaliatory tariffs imposed by one of the largest importers of U.S. soybeans – China.

Johnson and her husband are proud sixth-generation farmers but say they are dealing with some of the harshest economic conditions of their lives.

“We’re all tightening our belts,” she says.

The ongoing trade dispute between the United States and China, initially sparked by U.S. tariffs on imported aluminum and steel, is now impacting most farms across the country. 

As U.S. farmers head to the fields to plant this spring, they are facing a potential sixth consecutive year of declining farm income, because of international tariffs that have depressed prices for their grain products as well as increased costs for the materials to produce and store them.

​Short-term concern over U.S. trade policy is turning into long-term fear for farmers, who face uncertainty over congressional support for a new trade agreement with Canada and Mexico, and the impact of China’s retaliatory tariffs on U.S. grain exports. 

“We hear it may be out to 2025 before we see some of those markets come back to us, if they ever do,” Johnson said. “I think that’s the thing that hurts the most is, what is the damage being done that is irreparable?”

It is damage her son Ben Johnson, the seventh generation in the family business, may eventually have to deal with.

“All farms are going to suffer because of this,” he explained. “There’s a difference between ‘making it’ and flourishing.”

The Johnsons feel there is a growing disconnect between farmers and the rest of the American workforce, fueled by politicians increasingly hostile to trade policies the agricultural industry depends on.

“We need as much trade as we can and to be openly trading with as many places as we can,” Ben Johnson says. “It’s no different to any business – you want as many customers as you can. And to intentionally discourage them is frustrating.”

Neither Johnson nor his mother voted for President Donald Trump in the 2016 presidential election, largely because if his trade positions, they say. 

​Nothing that has happened since the election has eased Pam Johnson’s concerns.

“Saying that ‘I’m a tariff man’ and that ‘trade wars are easy to win’ concerns me,” she says, quoting comments the president has made. “There are still a lot of farmers who still support President Trump. I think there are more seeds of doubt being planted as we look forward into 2019 and no resolution and the light at the end of the tunnel seems to be getting dimmer about getting these things done.”

Politics aside, Pam Johnson admits success for her family business is closely tied to U.S. trade policy.

“I don’t want to see President Trump fail in these trade endeavors. We all need him to make this work so that all of us win,” she says.

A win her son Ben says can’t come soon enough.

“We’ve already missed the peak soybean export season, so in a way, it’s already too late… I guess it’s never too late, but before now would have been great,” he says.

While negotiations continue, the Trump administration says it is actively working on a new financial assistance program to help farmers weather the continuing trade storm.
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For sale: waterfront property with sweeping views of the Atlantic Ocean. Waves erode beach regularly. Flooding gets worse every year. Saltwater damage to lawn.

Asking price: anyone’s guess.

Some research suggests rising sea levels and flooding brought by global warming are harming coastal property values. But other climate scientists note shortcomings in the studies, and real estate experts say they simply haven’t seen any ebb in demand for coastal homes.

So how much homeowners and communities should worry, and how much they should invest in remedies, remains an open question.

Nancy Meehan, 71, is considering putting her coastal condo in Salisbury up for sale this year, but she worries buyers will be turned off by the winter storms that churn the seas beside the summer resort town. Her home has been largely spared in the nearly 20 years she’s lived there, she said, but the flooding appears to be worsening along roads and lower properties.

‘My life savings’

“All my life savings is in my home,” Meehan said of the four-bedroom, two-bathroom condo, which she bought for $135,000. “I can’t lose that equity.”

Nearby, Denis Champagne can’t be sure that rising seas are hurting his waterfront home’s value. The three-story, four-bedroom home has views of a scenic marsh, has been renovated and is blocks from the ocean — yet was assessed around $420,000.

“Do I feel that it should be worth more than that?” Champagne said recently in his sun-soaked living room. “I mean, I’m biased, but where can you find this for that price — anywhere?”

Community relies on real estate taxes

A drop in home values could shatter a community like Salisbury, which relies almost exclusively on beachfront real estate taxes to fund schools, police and other basic services, researchers warn. And, they say, families could face financial ruin if they’ve been banking on their home’s value to help foot the bill for pricey college tuitions or retirement.

“People are looking at losing tens of thousands of dollars of relative value on their homes,” said Jeremy Porter, a data scientist for the First Street Foundation, which describes itself as a “not-for-profit organization of digitally driven advocates for sea level rise solutions” on its Facebook page. “Not everyone can sustain that.”

Still, home prices in coastal cities have been rising faster than those of their landlocked counterparts since 2010, according to data provided by the National Association of Realtors.

And waterfront homes are still generally more expensive than their peers just one block inland, said Lawrence Yun, the association’s chief economist.

“The price differential is still there,” he said. “Consumers are clearly mindful that these climate change impacts could be within the window of a 30-year mortgage, but their current behavior still implies that to have a view of the ocean is more desirable.”

One $16 billion estimate

A nationwide study by the First Street Foundation suggests climate change concerns have caused nearly $16 billion in lost appreciation of property values along the Eastern Seaboard and Gulf Coast since 2005.

The study singles out Salisbury as the hardest-hit community in Massachusetts. Coastal homes there would be worth $200,000 to $300,000 more if not for frequent tidal flooding and powerful coastal storms, the study suggests. Champagne’s property, for example, would be worth about $123,000 more, according to Flood iQ, a property database the group has developed.

In another recent study, researchers at the University of Colorado Boulder’s School of Business found coastal properties most exposed to sea level rise sold, on average, for 7% less than equivalent properties the same distance from shore but not as threatened by the sea.

And in Florida’s Miami-Dade County, higher-elevation properties are appreciating faster than lower ones as companies and deep-pocketed buyers increasingly consider climate change risks, a study in the publication Environmental Research Letters found last year.

​Studies laudable, but may be flawed

The three studies are laudable because they attempt to quantify what the insurance industry and federal government had long suspected: that climate change is having tangible harm on home values, said S. Jeffress Williams, a scientist emeritus with the U.S. Geological Survey in Woods Hole, Massachusetts, who wasn’t involved with any of the research.

But Williams and other researchers note the First Street Foundation study uses sea-level rise predictions from the Army Corps of Engineers that are more dire than figures from the National Oceanic and Atmospheric Administration, which usually provides the go-to numbers for such studies.

The decision to use Army Corps projections has “minimal impact” on the study’s assessment of current property values since those figures are based on where flooding is already happening, but it does factor into the study’s future estimates, said Steven McAlpine, a data scientist for the foundation.

“We feel it is a reasonable projection,” he said.

The other two studies largely rely on data from Florida, which is so low and highly developed that in many ways it is an outlier, unaffiliated researchers point out. They also focus only on single-family homes, leaving out huge numbers of condos, high-rises and other multifamily properties.

Just build a seawall

In Salisbury, real estate broker Thomas Saab insists something is happening with home prices but is not sure whether climate change is behind it.

Two clients in the otherwise strong real estate market, he said, were recently forced to lower their asking prices by tens of thousands of dollars when prospective buyers voiced concerns about storm damage and risks.

“Do I worry prices are coming down? Sure,” Saab said. “Fewer buyers are willing to take the risk. People don’t want to live through nor’easter after nor’easter with no protection.”

He argues there’s a simple solution: Invest in sturdy seawalls as Hampton Beach, the lively resort town just over the border in New Hampshire, did generations ago.

“We can overcome any kind of rising seas if you just let us protect our properties,” Saab said. “Who cares about the climate change? You build a seawall and this whole discussion goes away.”
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Stocks climbed on Tuesday and clawed back a chunk of their losses from Monday’s rout, the latest whipsaw move as investors weigh just how badly the escalating U.S.-China trade war will hurt the economy. 

The day’s rally was nearly a mirror image of Monday’s plunge, when the S&P 500 had its worst day since early January, just not as severe: Technology companies led the way higher after bearing the brunt of the selling on Monday, Treasury yields rose modestly and gold gave back a bit of its gains. 

The S&P 500 rose 22.54 points, or 0.8%, to 2,834.41. It recovered nearly a third of its loss from Monday, and would now need to rise 3.9% to regain the record it set a couple weeks ago. The Dow Jones Industrial Average rose 207.06, or 0.8%, to 25,532.05, and the Nasdaq composite index jumped 87.47, or 1.1%, to 7,734.49. 

Of course, stocks are still lower than they were last week, following China’s pledge to raise tariffs on U.S. goods. Stocks also remain lower than they were on May 5, when President Donald Trump ignited this latest round of fear for markets by announcing on Twitter that the U.S. would raise tariffs on Chinese goods. 

Tuesday’s rally came after another round of morning Trump tweets on trade. He said, “When the time is right we will make a deal with China,” and he cited his “unlimited” respect for and friendship with China’s leader.

Investors are looking for a “place of equilibrium,” said Mark Hackett, chief of investment research for Nationwide Investment Management.

“My skepticism is that there’s really not a lot of news driving the rally,” he said. “It feels like an attempted recovery that may not have legs.”

‘Looking for path to progress’

In the meantime, any further hints of resolution on the trade dispute — or Twitter storms — could drive markets into their next swing. 

“We’re not counting on a full resolution,” said John Lynch, chief investment strategist at LPL Financial. “But, we’re looking for a path to progress.”

The worries about trade have shattered what had been a remarkably steady rise for stocks at the start of this year. As 2019 began, investors increasingly bet that a trade deal would happen, and the Federal Reserve said it would take a pause in raising interest rates, which helped the S&P 500 rocket to its best start to a year in decades. 

If the trade dispute gets worse, or lasts longer than many expect, it could hurt confidence among businesses and households. If that in turn drives spending lower, it would lead to lower economic growth and corporate profits. 

On Tuesday, at least, such worries eased. An index known as Wall Street’s “fear gauge,” which measures how much traders are paying to protect themselves from upcoming price swings for stocks, dropped 12.1%. A day earlier, it had spiked 28.1%. 

The VIX index remains higher than it’s been for much of the past five years, but fear is considerably lower than it was during the market sell-off late last year sparked by worries about a possible recession. 

Tech companies post gains

Investors also returned to stocks of tech companies, which may have the most to lose from a protracted U.S.-China trade battle because many of their customers and suppliers are abroad. Tech stocks in the S&P 500 jumped 1.6%, with semiconductor companies making particularly big gains. 

A day earlier, tech stocks had taken the market’s heaviest losses. 

On the flip side were utility stocks, which were the only one of the 11 sectors that make up the S&P 500 to fall. A day earlier, when all the fear in the market put an alluring spotlight on the utility sector’s steady profits and dividends, they had been the only S&P 500 sector to manage a gain. 

Other investments seen as safe harbors also dropped, such as U.S. government bonds. When a bond’s price falls, its yield rises, and the yield on the 10-year Treasury rose to 2.41% from 2.40% late Monday. It was at 2.45% at the end of last week. 

Gold is another investment that tends to do fade when investors are feeling more optimistic, and it fell $5.50 to settle at $1,296.30 per ounce. 

In overseas stock markets, European indexes gained. The French CAC 40 jumped 1.5%, the German Dax rose 1% and the FTSE 100 in London climbed 1.1%. Asian markets were mixed. The Hang Seng in Hong Kong dropped 1.5%, Japan’s Nikkei 225 fell 0.6% and South Korea’s Kospi ticked up 0.1%.

Silver jumps 4 cents

In the commodities markets, silver rose 4 cents to $14.81 per ounce, and copper gained a penny to $2.73 per pound.

Benchmark U.S. oil rose 74 cents to settle at $61.78 per barrel. Brent crude, the international standard, gained $1.01 to $71.24 a barrel. 

Natural gas rose 4 cents to $2.66 per 1,000 cubic feet, heating oil rose 2 cents to $2.06 per gallon and wholesale gasoline rose a penny to $1.98 per gallon. 

The dollar rose to 109.64 Japanese yen from 109.34 yen late Monday. The euro slipped to $1.1207 from $1.1231, and the British pound fell to $1.2905 from $1.2965. 
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A U.S. labor agency has concluded that ride-hailing company Uber Technologies Inc’s drivers are independent contractors and not its employees, which could prevent them from joining unions.

The National Labor Relations Board’s general counsel, in a memo released on Tuesday, said Uber drivers set their hours, own their cars and are free to work for the company’s competitors, so they cannot be considered employees under federal labor law.

San Francisco-based Uber in a statement said it is “focused on improving the quality and security of independent work, while preserving the flexibility drivers and couriers tell us they value.”

Uber shares were up 6.4 percent at $39.46 in late trading on the New York Stock Exchange.

The memo dated April 16 came in an NLRB case against Uber that has yet to reach the five-member board, which is independent of the general counsel.

Under the National Labor Relations Act, independent contractors cannot join unions and do not have legal protection when they complain about working conditions.

In January, President Donald Trump’s appointees to the NLRB adopted a new test making it more difficult for workers to prove they are a company’s employees.

Uber, its top rival Lyft Inc, and many other “gig economy” companies have faced scores of lawsuits accusing them of misclassifying workers as independent contractors under federal and state wage laws.

Employees are significantly more costly because they are entitled to the minimum wage, overtime pay and reimbursements for work-related expenses under those laws.

Uber, in a filing with the U.S. Securities and Exchange Commission last week, said it would pay up to $170 million to settle tens of thousands of arbitration cases with drivers who claim they were misclassified. Uber denied any wrongdoing, but said settling the cases was preferable to drawn-out litigation.

The company has agreed to pay an additional $20 million to end long-running lawsuits by thousands of drivers in California and Massachusetts.

The U.S. Department of Labor in a memo released last month said an unidentified “gig economy” company’s workers were not its employees under federal wage law because it did not control their work.

The company, which appeared from the memo to provide house-cleaning services, had a similar relationship with its workers as Uber does with drivers. The memo signaled a shift from the Obama administration, which maintained that most workers should be considered companies’ employees.
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