A Break for the Weakened Housing Market | Chief Investment Officer

The long-suffering housing market may be getting a break, thanks to lower mortgage rates.

High interest rates for home loans have been one of the reasons that buying residential real estate has been unaffordable for too many Americans. But recently, the rate for a 30-year fixed loan has dipped to 3.8%, down from 4.87% last November.

That’s the result of a trend toward lower rates: The 30-year Treasury and the 10-year Treasury—which affect the 30-year and 15-year mortgage market—have gone down among strong demand for the safety of long-term US government bonds. At the same time, the Federal Reserve is expected to cut short-term rates, which impact adjustable-rate mortgages.

So expect a turnaround in housing starts, states Joseph Lavorgna, Nataxis’ chief economist, Americas, in a research note. Last month, housing permits fell 6.1% to only 1.22 million units. “Residential construction has been one of the softest pockets of the economy, but should benefit over time from falling interest rates,” he wrote.

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When mortgage rates surged a full percentage point from late 2017 to late 2018, monthly starts slid to 1.2 million from 1.4 million.

People’s houses are far and away their biggest asset, and the dream of home ownership, while diminished lately due to costs, never has gone away.

Of course, other factors affect housing, such as consumers’ disposable incomes and credit ratings, which need to be high enough for them to afford purchasing a dwelling. And the White House is acutely aware that a sluggish housing market will be an obstacle for President Donald Trump’s reelection plans next year.

That’s likely why the administration has been in no hurry to end the decade-long federal conservatorship of Fannie Mae and Freddie Mac, which buy mortgages and help keep home lending going. If a rocky transition for Fannie and Freddie messed up the housing market, that would be a big minus for Trump.

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Tags: Federal Reserve, housing starts, Interest Rates, mortgage rates

The Church Pension Group (CPG) of the Episcopal Church reported that its investment portfolio increased 1.5% to $13.5 billion for the fiscal year ending March 31, from $13.3 billion the previous year. Despite the modest gain for the year, the Church reported that the fund has outperformed both its investment goals and benchmark performance over the past three, five, and 10 years.

The Church reported that the portfolio returned 8.7%, 7.0%, and 10.2% over the past three, five, and 10 years, respectively. This is compared with its investment targets of 6.7%, 6.0%, and 6.3% over the same time periods, and the benchmark performance of 7.9%, 7.0%, and 9.5%, respectively.

The asset allocation of the investment portfolio is 28.6% in global equities, 26.4% in global bonds, 17.1% in private equity, 15.8% in specialized strategies, 9.2% in real estate, 2.7% in private specialty strategies, and 0.2% in cash.

The CPG also said it has approximately $1 billion either invested in or committed to socially responsible investments, including a recent $40 million investment in the New Energy Capital Infrastructure Credit Fund II, which supports the development and operation of clean energy projects, including solar, wind, energy efficiency, and water in North America.

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According to the CPG’s annual report, a significant portion of the fund’s assets are invested in alternative assets, as it has open investment commitments of $2.7 billion to limited partnerships, which include interests in real estate, private equity, and other alternative investments. The group said it expects this amount to be funded during future years. During April, the fund invested an additional $81 million in and made $75 million of new commitments to limited partnerships.

The report also showed that Chief Executive Officer Mary Katherine Wold and Chief Investment Officer Roger A. Sayler received total cash compensation of approximately $1.65 million and $1.3 million, respectively, for the year.

Tags: Church Pension Group, Pension, Returns