To be sure, new housing starts have stagnated while existing home sales weakened through 2018 (see Charts 1 and 2). This was likely due to rising interest rates and, to a certain extent, home prices. The US Federal Reserve raised policy rates four times last year. The 30-year fixed-rate mortgage rate rose steadily from under 4% at the beginning of 2018 to nearly 5% in November (see Chart 3).
(Apr 12): Last week, I talked about why US consumers may well be the key driver for near-term global growth, contrary to widely held views. To very quickly recap, thanks to a decade of deleveraging, in the aftermath of the global financial crisis, US households have rebuilt their balance sheets. Household debt now stands at only 71.3% of GDP, down from the peak of 98.6% in 2007. Crucially, debt servicing as a percentage of disposable income has dropped to the lowest level in decades — leaving consumers with more to spend and/or save.
All these things bode well for US consumption, including the housing sector. On the strength of this conviction, I have added three US consumer and housing-related stocks to the Global Portfolio — The Walt Disney Co, Home Depot and Builders FirstSource.
