Market Update | 11.3

01  Nearly 140 countries signed up for a historic agreement on new international tax rules, including a global minimum tax that will hopefully end the damaging race to the bottom on corporate taxation.  The agreement would impose a minimum 15% corporate tax rate in nearly every country in the world and punish the few holdouts who refuse to go along. The O.E.C.D. estimates the accord will raise $150 billion per year globally from tax-fleeing companies. U.S. corporations dodge around $90 billion a year in income taxes by shifting profits to subsidiaries — often no more than a post office box — in tax havens. U.S. corporations hold $2.1 trillion in profits offshore — much in tax havens — that have not been taxed in the U.S. The top 5% of Americans fail to pay an estimated $307 billion in taxes every year, according to a recent report from the Treasury Department, with the top 1% owing more than half of that, at $163 billion. The head of the IRS calculated that tax evasion in the U.S. may total $1 trillion a year! (Bloomberg, CNBC)

02  New trade tariff policies would allow the European Union to ship 3.3 million metric tons of steel annually into the US duty-free, while any volume above that would be subject to a 25% tariff. The US imported 4.8 million metric tons of European steel in 2018, a level that fell to 3.9 million in 2019 and 2.5 million in 2020. This could help ease pricing on steel which has eased down 18% in the month of October before this announcement. Steel rebar is used in almost every home/apartment built in the USA.

 

03  Lumber prices are down almost 60% since their massive spike peaked in May. Aluminum prices dropped 14% since their high earlier in October. Natural gas prices are way up but are less than half of what they were in June, 2008 or September 2005 when they doubled in 5 months. I keep mentioning these things as they filter down directly to existing homeowners, construction and renovation.

 

04  In 2020, about 28% of real-estate transactions could be characterized as downsizing. The majority of these sales were made by buyers 55-plus.  It seems everyone is competing for the same product of which there is an under-supply! The share of older homeowners with debt has steadily increased over the past decade, rising to 55.4% in 2019 from 33.2% in 2007. Many older homeowners are deciding to age in place as their homes have escalated in value over the decades and may now cost them less than downsizing/buying a smaller house. Capital gains taxes factor into this decision too and some homeowners are facing enormous bills due to enormous gains. (NAR/WSJ)

05  Commercial Real Estate Sales activity for the first 9 months of 2021 totaled $462.1 billion, up 10% from the same 9-month period in 2019 and the highest ever for the first three quarters of any year. (WSJ)

06  The average 30-year-fixed mortgage rate continues to trend upwards, rising by five basis points to 3.14% for the week ending Oct. 28th. (Housingwire)

07  Around 14% of the US population is foreign-born....and almost 55% are NOT from Mexico, China, India, the Philippines, or El Salvador. One quarter (25%) of new U.S. businesses are founded by immigrants. Almost 25% of immigrants or refugees to the US are self employed.

08  Annual inflation rose at its fastest pace in more than 30 years during September despite a decline in personal income. Headline price pressures as gauged by the personal consumption expenditures price index including food and energy increased 0.3% for the month, pushing the year-over-year gain to 4.4%. That’s the fastest pace since January 1991. Without food and energy costs, inflation rose 0.2% for the month and 3.6% for the 12-month period, unchanged from August but the highest since May 1991. Personal income declined 1% in September, more than the expected 0.4% drop. Consumer spending increased 0.6%. (CNBC)