—— U.S. Existing-Home Sales Fall for 12th Straight Month; Morgan Stanley Warns of 26% Market Drop; Walmart Forecast Disappoints, Shares Fall 4%; Yelp Sees 70% Staff Drop in HQ Cities; Key U.S. Office Market Data Released; Microsoft Signs 10-Year Deal with Nintendo; Tesla EVs Now Most Affordable Ever
1. U.S. Existing-Home Sales Fall for 12th Straight Month
According to data released today by the National Association of Realtors (NAR), U.S. existing-home sales declined again in January, falling 0.7% from the previous month to an annualized rate of 4 million units—the slowest pace since 2010.
Additionally, the average time homes spent on the market increased, forcing many sellers to accept lower offers. Average listing duration rose from 19 days last year to 33 days.
NAR Chief Economist Lawrence Yun stated that existing-home sales appear to be nearing a bottom, and buyers now have more negotiating power. Many homes listed for more than 60 days are selling for around 10% below the asking price.
The median sales price rose 1.3% year-over-year to $359,000, marking the smallest annual gain in nearly 11 years.
January marked the 12th consecutive decline in U.S. existing-home sales, reaching the lowest level since 2010.
______
2. Morgan Stanley Warns of 26% Market Drop
Morgan Stanley’s strategy team, led by Michael Wilson, warned that although recent data suggests the Federal Reserve could reduce inflation without triggering a recession, U.S. stock gains over the past month have been excessive. The equity risk premium (return over risk-free rate) has fallen to its lowest level since 2007, implying insufficient reward for risk.
Wilson stated that U.S. stocks are now in a “death zone” where the risk-return profile is highly unfavorable, and analysts’ earnings forecasts may be overstated by 10% to 20%.
Unlike more optimistic peers, Wilson expects the S&P 500 to drop 26% to 3,000 in the first half of the year.
Morgan Stanley believes the S&P 500’s low risk premium makes the potential reward unjustifiable given the risk.
______
3. Walmart Forecast Disappoints, Shares Fall 4%
Retail giant Walmart today reported Q4 fiscal 2023 revenue rose 7.3% to $164 billion, beating analyst expectations. However, it sharply lowered its fiscal 2024 guidance, sending shares down 4.3%.
Walmart forecast adjusted full-year profit could fall as much as 6.2% to $5.90 per share, while Wall Street had expected earnings per share to rise 3.8% to $6.53.
For fiscal 2024, Walmart projected same-store sales growth (excluding fuel) of 2% to 2.5%.
Last year, Walmart failed to anticipate a shift in consumer behavior, leading to excess inventory in apparel and home goods. Fortunately, rising wages supported strong grocery sales.
CFO John Rainey said the economic environment remains uncertain, and the company is closely watching the Fed’s balance sheet reduction and the decline in savings returns.
While Walmart outperformed rivals in 2022, it may be overtaken this year amid growing headwinds.
______
4. Yelp Sees 70% Staff Drop in HQ Cities
According to a new internal study from Yelp, after announcing a permanent remote work policy, the number of employees living near its San Francisco headquarters fell 70% between 2019 and 2022. The same trend occurred in New York, Washington D.C., and Chicago, with a 67% drop.
During that same period, the number of Yelp employees residing in Florida and Texas quadrupled.
In June 2022, Yelp co-founder Jeremy Stoppelman announced the closure of offices in New York, Chicago, and D.C., citing average building utilization of just 2%.
By 2022, Yelp employees were living in 1,300 cities worldwide, up 50% from 2019.
After embracing remote work, most Yelp employees relocated to lower-cost, more livable cities.
______
5. Key U.S. Office Market Data Released
CommercialEdge recently published a new U.S. office market report with the following key highlights:
- Average office rent nationwide rose 1.1% year-over-year to $38.04 per square foot;
- National office vacancy rate increased 80 basis points year-over-year to 16.6%;
- Total office space under construction reached 123 million square feet, representing 1.9% of stock;
- Office property sales in January totaled $1.9 billion, with an average price of $202 per square foot;
- Denver’s vacancy rate hit 18.3%, impacted by remote work and tech sector layoffs;
- South Dallas led the nation in office development, with 7.4 million square feet under construction;
- Boston recorded the highest average office sale price at $1,054 per square foot.
Despite some relief in the office debt crisis, weak demand and economic uncertainty remain key challenges.
______
6. Microsoft Signs 10-Year Deal with Nintendo
Today, Microsoft President Brad Smith tweeted that the company signed a 10-year agreement with Nintendo to release the Call of Duty franchise on both companies’ gaming consoles simultaneously.
Microsoft acquired Activision Blizzard for $69 billion last year. Due to Call of Duty’s massive popularity, rivals like Sony and U.K. regulators have raised concerns over potential platform monopolization.
However, this deal with Nintendo serves as Microsoft’s clearest effort to counter those fears.
According to market research firm NPD, the latest Call of Duty release remains the best-selling game in the U.S.
Call of Duty will now launch simultaneously on Nintendo and Xbox, easing monopoly concerns.
______
7. Tesla EVs Now Most Affordable Ever
According to Bloomberg’s latest analysis, the Tesla Model 3 is now $4,930 cheaper than the average new vehicle in the U.S.—the largest relative discount in Tesla’s history.
Earlier this year, Tesla also slashed Model Y prices by $13,000. Even before the cuts, the Model Y was the third best-selling SUV in the U.S., behind the Honda CR-V and Toyota RAV4. Orders for the Model Y are now backlogged through the end of Q1 2023.
Tesla began slashing EV prices abruptly on January 12. Ford quickly followed with price cuts on its Mustang Mach-E.
By contrast, traditional gas-powered vehicle prices have climbed. Since the pandemic, average ICE vehicle prices rose $10,000 to $47,900, driven by chip shortages, raw material inflation, and inventory manipulation by automakers.
Model 3 and Model Y prices are at all-time lows relative to the market—making now a prime time to buy.
______
This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.