Investment Thesis

High unemployment rates and financial challenges among small businesses are two big problems that the markets are ignoring. Such problems may have negative impacts on the economy as a whole as small and medium enterprises (SMEs) make the majority of all businesses in America. PS Business Parks (PSB), which have a large tenant base of SMEs, is at risk as small business America struggles to recover. While PSB is an excellent company with desirable qualities, prices do not offer an adequate margin of safety. I rate shares a Hold.

The Elephant In The Room

Back in March, analysts and reporters were having a debate on which letter of the alphabet would illustrate recovery in the next few months or years: J, L, U, V, W, K? Economically speaking, we’re seeing more of an alphabetti spaghetti. E-commerce is having a J-recovery as people are smashing the “Buy now with 1-Click” button in Amazon (AMZN) than ever before. Airlines are having an L-shaped recovery with passenger traffic slowly increasing week-by-week. The entertainment and tourism industry is still in limbo and recovery should look like a U-shape once the vaccine arrives. Restaurants, on the other hand, may face the threat of a double-dip, W-shaped recovery if another lockdown were to happen. In short, we’re seeing disproportionate recovery across all sectors. All this is happening while the stock market is rallying to new all-time highs as if the pandemic did not really happen. So, equity market-wise, we’re looking at a V-shaped recovery… for now.

What is concerning is that the markets are ignoring the elephant in the room: sky-high unemployment rate. Yes, the number is improving from its high of 14.7% in April. However, weekly initial jobless claims have remained at about 800,000 for nearly two months, showing a significant deceleration in

KEY POINTS

  • Every $1,000 increase in home price pushes 150,000 buyers away: Report 
  • Rental prices have dropped by 0.1% since last month: Report
  • Homebuying is currently led by people with jobs and equity

Rising demand for homes, unprecedented levels of mortgage rates and low supply have pushed home prices out of reach for prospective homebuyers, which could make America a ‘renter nation,’ Grant Cardone, a real estate investor, told Yahoo.

“Homeownership is still dead in this country because the only people that are buying homes right now are people that have equity, great credit, and a job,” Cardone said.

For every $1,000 increase in home price, 150,000 buyers are priced out of a possible home purchase, according to a recent report by the National Association of Home Builders (NAHB).

The fall season is known to be good for real estate as home prices fall during this time. Realtor.com, however, suggests that median home prices rose to $350,000 in the week ending Oct. 9, almost matching summer highs. This was 12.9% higher than the previous week.

On the other hand, the rental market is looking more desirable and economic with prices dropping. Data from rental website Zumper suggests that the median rent price for a one-bedroom apartment slid 0.1% from last month.

Cardone said a secure job is a way to secure a home loan. Americans would need a better credit score now than they did before COVID-19 to get a home loan, he told Yahoo.

As the pandemic progressed from early February, the American public, especially renters, have higher rates of unemployment, fewer savings to be used for a down payment, and lower credit scores, Elizabeth Renter, an analyst at Nerdwallet, told Yahoo.

Even though the public is struggling with finances, banks have increased their requirements to give out loans,

By Jonathan Cable

LONDON, Oct 5 (Reuters)The euro zone’s economic recovery faltered in September with growing evidence sectors and countries in the bloc are diverging as a resurgence of the coronavirus forces the reimposition of restrictions on activity.

A rise in infection rates in Europe, which a Reuters poll concluded last month was the biggest threat to the economic recovery, will concern policymakers who had hoped the euro zone economy was healing after contracting an historic 11.8% in the second quarter. ECILT/EU

Monday’s purchasing managers’ surveys showed services activity, which accounts for around two-thirds of the bloc’s GDP, slammed into reverse after sister surveys last week suggested factories was enjoying something of a revival.

There was also a split between the currency union’s member countries. While Germany’s service industry barely grew in September, strong manufacturing helped the private sector in Europe’s largest economy remain on track for a solid recovery.

But French business activity fell for the first time since June and in Spain the services sector sank deeper into the red as travel restrictions ravaged the summer tourism season.

Italy’s services industry contracted for the second month running with no sign of recovery on the horizon.

“The recovery in industry had been lagging but does seem now to have been catching up whereas services really is bearing the brunt of tighter restrictions,” said Jessica Hinds at Capital Economics.

“In Spain and France in particular, and elsewhere in the euro zone, there has been a tightening up. Fears of a resurgence are adding to consumer caution,” Hinds said.

Meanwhile, Britain’s economy, outside the currency union, proved more resilient than initially thought last month, despite a tightening of lockdown restrictions and an end to a temporary government subsidy for businesses such as restaurants and bars. GB/PMIS

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