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Housing To Head Higher While Employment Lags Intensely

Dec. 09, 2021 9:55 AM ETADC, AMZN, ING, K, SPG, TM, TOL, UMH4 Comments
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  • Luxury home builder, Toll Brothers (TOL), doesn’t expect the housing market to cool down next year.
  • The U.S. economy had a record 11.1 million job openings – jobs that need to be filled and are not yet – which only dropped to 11 million in October.
  • "No employer is in a celebratory mood. It is difficult to fill orders or meet customer demands if there are not enough people to do the actual work".

Quote of the Day:

“Firms are desperate to recruit and are willing to pay more for staff.” – ING Chief International Economist James Knightley

(Source: Canva.com) Let’s see if I can get to everything I want to get to today, starting with what I missed yesterday…

Specifically how luxury home builder Toll Brothers (TOL) doesn’t expect the housing market to cool down next year. It reported earlier this week that it foresees 20% revenue growth for its fiscal 2022.

That was after it reported quarterly adjusted earnings of $3.02 per share – more than $0.50 higher than the expected $2.49. And revenue rose 18.2% to $2.95 billion year-over-year.

I guess that makes Elon Musk just as unique as ever considering how he sold his Silicon Valley home this week for $30 million. He’s now officially fulfilled on last year’s promise to “own no home” while so many others scramble to find houses.

Also unique is how the larger housing craze coincides with such an abysmal employment situation. The U.S. economy had a record 11.1 million job openings – jobs that need to be filled and are not yet – which only dropped to 11 million by the end of October.

Here’s a snippet from Yahoo Finance’s “Morning Brief”:

“Data from the Bureau of Labor Statistics released Wednesday confirmed the persistence of hiring difficulty for America’s employers. From restaurants to retail, industries across the economy continue to operate with fewer workers than pre-pandemic levels…

“‘No employer is in a celebratory mood. It is difficult to fill orders or meet customer demands if there are not enough people to do the actual work,’ said BMO Capital Markets Senior Economist Jennifer Lee.”

That makes Kellogg’s (K) worker situation even more problematic. After over two months of 1,400 employees striking amidst failed negotiations, it says it has “no choice but to hire permanent replacement employees.”

But how easily can it do that? I’m not that optimistic, and I doubt management is either.

Lack of Employees Leads to Inflation, and Amazon Gets Slapped With an Italian Fine

The employee shortage isn’t helping lower inflationary pressures either. At the risk of stating more of the obvious, I’m going to quote another Yahoo Finance article, this one saying that:

“The continuous labor shortage is weighing down potential economic growth, a new report from ING (ING) found.

“‘Labour supply simply isn’t returning quickly enough; and for companies desperate to hire, this is a huge problem,’ the report noted. ‘The implication is that it constrains growth and pay is bid higher, with those cost increases likely passed onto consumers.’

“The report examined last month’s job report and placed some of its numbers in a larger context. Payrolls rose by 210,000, well under the 550,000 consensus estimates. According to the report, ‘U.S. employment is still [$3.9 million] below pre-Covid levels.’”

It added that “There is absolutely no problem with demand. The issue is the lack of workers to hire, with the labour participation rate remaining woefully low at 61.8%.”

It’s those inflationary factors that has the Federal Reserve saying it will raise rates in Q3-22 – ahead of previous guidance given just a month ago.

Moving over to the U.K., Prime Minister Boris Johnson announced that office employees have to start working from home again. He also mandated face masks in most public indoor areas, as well as vaccine passports to attend nightclubs and similar public venues.

Just in time for Christmas too.

Then, over in Italy, the government just fined Amazon (AMZN) €1.13 billion, or $1.3 billion, for market dominance abuse. U.S.-based big tech companies in general are facing elevated attention across the continent.

And it’s not of the flattering variety. This move is just the latest regulatory action against them, though admittedly a very hefty one.

The World According to REITs

One last continental jump before we get to real estate investment trusts (REITs), this time to Japan. Toyota (TM) had to pause production at two factories thanks to – you guessed it – national supply shortages along with labor issues elsewhere.

According to Reuters, it had hoped to return to normal productivity this month. But the three-day break it’s now enacting will likely translate into a 3,500-vehicle shortfall for December.

Nonetheless, it maintains it can keep its full financial-year goal of nine million vehicles.

Now on to REITs, where we have just three updates today according to The Daily REITBeat:

  1. Agree Realty (ADC) priced a 5 million share public offering at $68.15 per to raise $340.75 million in gross proceeds. It expects to use any resulting net proceeds for general corporate purposes, including property acquisitions and developments.
  2. UMH Properties (UMH) signed a joint venture agreement with Nuveen Real Estate to develop or purchase manufactured housing communities. UMH will have a 40% stake but serve as both managing and operating member of the project.
  3. Simon Property Group (SPG) appointed Peggy Fang Roe to its board as an independent member.

Because those were the only reports to share this morning, I’m featuring the same three in today’s Intelligent REIT Daily. But that’s not usually the case.

Usually, there’s plenty to go around when it comes to keeping you up to date about our commercial real estate sphere. That’s why I highly recommend you sign up today for this free resource

In anticipation of what’s going to come tomorrow…

And next week…

And next month as the financial world continues to turn.

Intelligent REIT Daily also highlights other important resources I don’t want you to miss out on. And there’s even more – so much more – to explore when you join iREIT on Alpha!

That includes more of this kind of stock movement summary…

(Source: The DailyREITBeat)

Inflation Is a Monster REITs Can Help You Beat

One of my readers recently wanted to know if I was worried about inflation – an intensely legitimate question.

The simple answer is that I definitely do have it on my mind. Fortunately though, I also have REITs.

As I wrote months ago, real estate investment trusts offer “natural protection against inflation” since rental contracts tend to include such considerations. In fact:

“… many leases are tied to inflation. This supports REIT dividend growth and provides a reliable stream of income regardless, helping to support the following fact…

“That, in all but two of the last 20 years, REIT dividend increases have outpaced inflation as measured by the Consumer Price Index.”

Not bad, right?

Not bad at all! Just as long as you know which ones are worth your money at any given time – both from a valuation and quality perspective.

That’s why iREIT on Alpha gives members ahead-of-the-curve advice on what’s what in REIT-dom through:

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This is your chance to try us out – without any strings attached. Activate your two-week free trial period now and see if iREIT is right for you.

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Analyst's Disclosure: I/we have a beneficial long position in the shares of ADC, SPG either through stock ownership, options, or other derivatives.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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