As American men scramble to plan for their NFL fantasy football drafts, and as their wives cringe about the idea of grown men spending so much time playing a game, something is also going on in real estate. As football fan fervor builds about the upcoming season, the business of home buying is fizzling, and it always does at this time of year. Fear not though, because it's not an economic thing, though the Fed might just derail the housing recovery anyway. Rather, it's a seasonal issue, and it's as predictable as temperature change from spring to summer. As the NFL season gets hot, housing activity chills. Here's why…
While the NFL preseason began last week with the Hall of Fame game and the tear jerking induction speeches of Chris Carter and Warren Sapp, the rest of the league begins preseason play this weekend. You can be sure that I was tuned into the TV myself Friday evening, watching to see how my Philadelphia Eagles new offensive scheme worked out. Still, this is just preseason; the real season starts in September, which oh by the way, also marks the start of the school year.
Indeed, it's the march toward the school year that dictates the fervor with which American families go home shopping. American moms must have their new homes and families settled before the start of the school year, because moves during the school year can be disruptive to the learning process and the social development of children.
Real Estate Related Security
Last 3 Months
Last 12 Months
SPDR S&P Homebuilders (NYSEARCA:XHB)
iShares Dow Jones U.S. Real Estate (NYSEARCA:IYR)
Bank of America (NYSE:BAC)
Annaly Capital (NYSE:NLY)
The trends of major real estate related securities show investor anticipation of this seasonal shift. These here listed metrics of real estate health were also supersensitive this season, given their strong rise into it. Though, the decline also reflects the very important change in the mortgage market, where interest rates have risen significantly since the start of May.
Within the group of stocks listed here, Annaly Capital was markedly lower through both the 3 month and 12 month periods, but that contrasts against the rest of the group's performance and is largely the result of Annaly's double-digit dividend yield payout due to its mortgage REIT status. Large dividend payouts impact market capitalization and the inherent value of stocks. Within the group, only Bank of America was up in both the 3 month and 12 month periods, but that is the result of the broader benefits the bank garners from expanding interest rate spreads. The other three names within the list present a perfect illustration of the seasonal issue being discussed here. Each was markedly down over the 3 month span while boasting large gains over the last 12 months.
In conclusion, while the fall season may energize the lives of football fans across America, it pains the hearts of real estate market players. The seasonal issue at play is at least a part of the reason why business activity has ebbed and why real estate related securities have retraced ground. So, just as sure as men are tossing the pigskin around today, you can be sure real estate activity is slowing.