Housing Chartbook: June 2017 Are Soft Home Sales Due to a Lack of Supply, or a Lack of Demand?

Transcription

1 June 5, 217 Economics Group Special Commentary Housing Chartbook: June 217 Are Soft Home Sales Due to a Lack of Supply, or a Lack of Demand? Low inventories and the calendar took most of the blame for April s disappointing reports on new and existing home sales. New homes sales plunged 11.4 percent in April, while an upward revision to the prior three months data by a cumulative 55, units certainly takes some of the sting out of April s decline. However, the unusually large headline drop along with a less dramatic 2.3 percent drop in existing home sales and declines in both pending home sales and mortgage purchase applications raises the prospect that something else may also being going on. This past month s soft spot in sales was somewhat surprising given the recent strength in builder confidence (Figure 1). The Wells Fargo/NAHB Homebuilder Sentiment Index rose 2. points to 7 in May, as both present and future sales indices rose during the month. Builder confidence is near its highest point of the cycle and buyer traffic is said to be solid. A lack of homes available for sale is certainly part of the equation. Unseasonably mild winter weather likely allowed the spring home buying season to get off to an earlier start than usual, leaving fewer homes for potential buyers to choose from in April. Easter also came in mid-april, which likely negatively impacted sales that month. The impact of these two twists was magnified by the seasonal adjustment process, which looks for a big increase in sales each April, and thus made the smaller-than-usual rise look much weaker than it actually was. Even with April s soft patch, housing is still on track for its best year this decade. Sales of new homes through the first four months of this year are running 11.3 percent ahead of sales for the same period last year and sales of existing homes are up 2.1 percent for the comparable period. Housing starts also declined in April, although the entire drop was in multifamily units. Starts of new single-family homes rose.4 percent and are running 7. percent ahead of their year-ago pace through the first four months of this year. Builders are selling virtually everything they build and a rising share of new home sales are for homes that builders have not yet started. Mark Vitner, Senior Economist mark.vitner@wellsfargo.com (74) Misa Batcheller, Economic Analyst misa.n.batcheller@wellsfargo.com (74) April s soft spot in sales was somewhat surprising given the recent strength in builder confidence. Figure 1 Figure 2 1,65 1,5 1,35 1,2 New Home Sales vs. NAHB Wells Fargo Index Thousands of Units, SAAR, Index New Home Sales: 569, (Left Axis) NAHB Wells Fargo Index: 7. (Right Axis) Multifamily Starts Multifamily Forecast Single-Family Starts Single-Family Forecast Housing Starts Millions of Units , Forecast Source: U.S. Department of Commerce, NAHB and Wells Fargo Securities This report is available on wellsfargo.com/economics and on Bloomberg WFRE.

2 Housing Chartbook: June 217 June 5, 217 State-to-state migration has declined steadily in recent years and hit its lowest level in decades this past year. We are still looking for housing to have a relatively good year. Builders Are Selling Homes as Fast as They Can Build Them The ability to sell homes as quickly as they are built explains why the Wells Fargo/NAHB Homebuilder Sentiment Index is as high as it is today, averaging 69.7 over the past three months. The last time the index was this high, new home sales were more than 5 percent higher than they are today. Builders expectations are much more realistic, and most have shrunk their business to reflect the realities of today s market. Moreover, a great deal of new home construction in recent years has been at the high end of the market, where margins have been better. The median price of a new home has risen considerably faster than that of an existing home, ultimately reaching a premium of just over 4 percent in later 214 (Figure 3). Early on, that premium expanded due to the onslaught of distressed properties available for sale, which made it more difficult for builders to build starter homes. There has also been considerable variation in how much home prices have recovered in recent years. Large urban markets with outsized exposure to the tech sector, energy, and global capital have seen home prices appreciate much more than most other markets. Price appreciation in the suburbs, even in some of the fastest-growing metro areas, has generally lagged. As a result, many potential first-time and trade-up buyers in red-hot markets like the San Francisco Bay Area, Seattle and Denver have been priced out of the market. The lack of relative affordability has caused more people to put off relocating. State-to-state migration has declined steadily in recent years and hit its lowest level in decades this past year. The lack of affordability is apparent in the most recent data from the University of Michigan consumer sentiment survey. The survey shows that the proportion of consumers that feel now is a good time to sell a home is slightly higher than the proportion of consumers that feel it is a good time to buy (Figure 4). On the bright side, that may encourage more potential sellers to put their homes on the market, adding much needed inventory. The downside, however, is that even with the improving labor market, the proportion of consumers who believe now is a good time to buy a home is shrinking. The Conference Board s Consumer Confidence Index also noted that fewer consumers planned to purchase a home in the coming months. We left our housing forecast largely unchanged this past month and remain near the low side of consensus estimates for home sales and new home construction for 217 and 218. We are still looking for housing to have a relatively good year. We expect sales of new homes to rise 12.3 percent to 63, units, which would mark the best year since 27. We expect home prices to rise more modestly, however, as more builders are beginning to build for the first-time homebuyer market. Moreover, growth is shifting more toward the suburbs and to metro areas where housing prices and land are relatively more affordable, particularly in Texas, Florida, Georgia and the Carolinas. We look for existing home sales to rise 2.8 percent this year, and for the median price to rise 4.9 percent. Figure 3 Figure 4 $35 $3 Median New & Existing Home Sale Prices In Thousands, Single-Family Median New Sales Price: $39,2 Median Existing Sales Price: $246,1 $35 $ Good Time to Buy vs. Good Time to Sell University of Michigan Consumer Sentiment Survey Good Time to Buy a House: 145. Good Time to Sell a House: $3 $ $275 $ $ $ 1 1 $2 $ $2 $2 5 5 $175 $175 $ $ Source: NAR, U.S. Dept. of Commerce, University of Michigan and Wells Fargo Securities 2

3 Housing Charbook: June 217 June 5, 217 National Housing Outlook Forecast Real GDP, Percent Change Residential Investment, Percent Change Nonfarm Payroll Change (Avg. Monthly) Unemployment Rate Home Construction Total Housing Starts, in Thousands ,3.3 1, , ,26. 1,35. Single-Family Starts, in Thousands Multifamily Starts, in Thousands Home Sales New Home Sales, Single-Family, in Thousands Total Existing Home Sales, in Thousands 4,19. 4,26. 4,66. 5,9. 4,94. 5,. 5,45. 5,6. 5,71. Existing Single-Family Home Sales, in Thousands 3,78. 3,787. 4,128. 4,484. 4,344. 4,646. 4,838. 4,98. 5,85. Existing Condominium & Townhouse Sales, in Thousands Home Prices Median New Home, $ Thousands Percent Change Median Existing Home, $ Thousands Percent Change FHFA Purchase Only Index, Percent Change S&P Case-Shiller C-1 Home Price Index, Percent Change Interest Rates - Annual Averages Federal Funds Target Rate Prime Rate Year Treasury Note Conventional 3-Year Fixed Rate, Commitment Rate Forecast as of: June 5, 217 Source: U.S. Dept. of Commerce, U.S. Dept. of Labor, FRB, FHFA, FHLMC, National Association of Realtors, S&P, Wells Fargo Securities 3

4 Housing Chartbook: June 217 June 5, 217 Mortgages 7% Mortgage Rate vs. 1-Year Treasury Yield Percent 7% 28 Mortgage rates followed the 1-year Treasury yield lower during the week ended May 31. The conventional 3-year fixed mortgage rate averaged 3.94 percent during the week, according to Freddie Mac. This marks a.4 percentage point decline from the highs reached following the U.S. presidential election. Mortgage applications for home purchases dipped 1.4 percent, while refinancing applications fell a larger 5.6 percent during the week ended May 26. While demand has been solid this spring, mortgage applications to purchase a home have fallen for three consecutive weeks. The lack of supply of homes for sale is likely to blame for the decline, but higher home prices may also be hindering sales. Mortgage Applications for Purchase Index Seasonally Adjusted Index, 199=1 28 3% 2% 1% Conv. 3-Year Fixed Mortg. Rate: Year Yield: 2.2 % , 1, Mortgage Apps for Refi and 1-Year Treasury Yield 4-Week Moving Averages Refi Index: 1,334.9 (Left Axis) 1-Year: 2.3% (Right Axis) 3% 2% 1% % 7.% 6.% , 5.% , 4.% 2 2 4, 3.% , 2.% 16 Weekly Figure: Mort. Appl.: 4-Week Average: May ,5 1,35 New Home Sales vs. Mortgage Purchase Applications Thousands, Index 199=1; Seasonally Adjusted % 2 2% Mortgage Origination by Credit Score Billions of Dollars <62: $22.8B (R) : $28.B (R) : $1.6B (R) : $15.2B (R) 76+: $36.2B (R) Subprime Share: 8.2% (L) 1.% $1,2 $1, $8 1,2 1, $ % $ $ % $ 15 New Home Sales: 569, (Left Axis) Mortgage Purchase Applications: (Right Axis) Source: MBA, FHLMC, Federal Reserve Board, U.S. Dept. of Commerce, FRBNY and Wells Fargo Securities 4

5 Housing Charbook: June 217 June 5, 217 Single-Family Construction 2. Single-family starts inched up.4 percent in April, driven by gains in the Midwest and West. Through the first four months of the year, single-family starts are running a healthy 7. percent ahead of their year-ago pace. Leading indicators for the single-family market are mixed. Single-family permits, an indicator for future construction activity, have edged down over the past two months and are trending below the pace of starts. The NAHB/Wells Fargo Housing Market Index, which measures homebuilder sentiment in the single-family market, rose to its second-highest level of the current cycle in May. We continue to expect residential construction to be driven by growth in single-family housing. Single-Family Housing Starts vs. Building Permits SAAR, In Millions, 3-Month Moving Average Builder Confidence & Single-Family Starts Diffusion Index; Starts SAAR 3-MMA in Millions NAHB Housing Market Index: 7. (Left Axis) Single-Family Housing Starts: 848K (Right Axis) Single-Family Housing Completions Seasonally Adjusted Annual Rate, In Millions 2, 1,8 1,6 1,4 1,2 1, Single-Family Housing Starts: 848K Single-Family Building Permits: 816K ,4 2,1 1,8 1,5 1, Single-Family Housing Starts Annual Average of SAAR SF Housing Starts: 84K 217 is YTD Average of SAAR ,4 2,1 1,8 1,5 1, Single-Family Housing Completions: 784K Single-Family Housing Permits by MSA Year-to-Date, Total Number of Permits in Thousands Houston, TX Dallas, TX Atlanta, GA Phoenix, AZ Austin, TX Orlando, FL Charlotte, NC-SC Washington, DC-VA-MD-WV Nashville, TN Tampa, FL Raleigh, NC Los Angeles, CA Denver, CO Las Vegas, NV New York, NY-NJ-PA April Source: U.S. Department of Commerce, National Association of Home Builders and Wells Fargo Securities 5

6 Housing Chartbook: June 217 June 5, 217 Multifamily Construction 6 Multifamily Housing Starts vs. Building Permits SAAR, In Thousands, 3-Month Moving Average 6 April s pullback in overall housing starts was entirely driven by weakness in multifamily starts, which fell 9.2 percent over the month, marking the sector s fourth consecutive decline. We expect multifamily construction to continue to slow amid lessening demand and the onslaught of apartment completions that has inundated the market in recent years. Effective rent growth has slowed to 3. percent year over year marking the slowest pace since Q Annual effective rent growth fell for the second consecutive quarter in San Francisco and New York, while less tech-centric markets, such as Colorado Springs and Nashville, are reporting nation-leading gains. Multifamily Housing Permits by MSA Year-to-Date, Total Number of Permits in Thousands New York, NY-NJ-PA Dallas, TX Los Angeles, CA Denver, CO Seattle, WA Miami, FL Chicago, IL-IN-WI Atlanta, GA Austin, TX San Francisco, CA Phoenix, AZ Washington, DC-VA-MD-WV Boston, MA-NH Houston, TX Tampa, FL April Multifamily Housing Starts: 373K Multifamily Building Permits: 42K Multifamily Housing Starts SAAR, In Thousands, 3-Month Moving Average 5+ Units: 361K (Left Axis) 2-4 Units: 12K (Right Axis) % Apartment Supply & Demand Percent, Thousands of Units 1 6.% Apartment Effective Rent Growth Quarter-over-Quarter Percent Change 2. 8% 75 5.% 2.% 7% 5 4.% 3.% % 2.%.8% 1.%.%..% - -1.% % -.8% -3.% -1.2% -4.% Quarter-over-Quarter: (Right Axis) -1. Year-over-Year: 3.% (Left Axis) -5.% -2.% % Apartment Net Completions: 39, Units (Right Axis) -5 Apartment Net Absorption: 23,79 Units (Right Axis) Apartment Vacancy Rate: 4.3% (Left Axis) 2% Source: U.S. Department of Commerce, Reis, Inc., and Wells Fargo Securities 6

7 Housing Charbook: June 217 June 5, 217 Buying Conditions 9 Home Purchase Sentiment Index Index 9 Fannie Mae s Home Purchase Sentiment Index, a measure of consumers housing-buying attitudes, rose 2.2 points in April to The index was boosted by rising confidence in job security, with a net 77 percent of consumers reporting they are not concerned with losing their job in the next 12 months. The share of consumers stating now is a good time to sell a house has risen above the share reporting it is a good time to buy a house for the past two months, according to the University of Michigan consumer sentiment survey. This may presage a rise in the number of homes for-sale, which would be a welcomed development for the supply constrained housing market. 3 32% Consumer Confidence vs. Disposable Income Pct. Consumers That Expect Incomes to Increase Next 6 Months 6-Month Income Expectations 12-MMA: 18.8% (Left Axis) Income Yr/Yr % Chg. 12-MMA: 3.7% (Right Axis) 12% 1% Home Purchase Sentiment Index: Good Time to Buy vs. Good Time to Sell University of Michigan Consumer Sentiment Survey Good Time to Buy a House: 145. Good Time to Sell a House: % 8% % % 12% % % -2% $3 Existing Single-Family Home Prices In Thousands - $3 3% 2 18% Home Prices vs. Wages and Salaries Year-over-Year Percentage Change Wage & Salaries (3-MMA): 4.% S&P/Case-Shiller Composite-2: 5.9% National HPI: 5.8% 3% 2 18% 12% 12% $ $ % % $2 $ % -12% $15 Average Sale Price: $288,3 Median Sale Price: $246,1 $ $15 $1-18% % -2 Source: University of Michigan, National Association of Realtors, The Conference Board, S&P, Fannie Mae, U.S. Dept. of Commerce and Wells Fargo Securities 7

8 Housing Chartbook: June 217 June 5, 217 New Home Sales New home sales disappointed in April, falling a sizable 11.4 percent to a 569,-unit annualized rate. April s decline was largely due to seasonal influences. Warmer-than-usual weather at the start of the year likely pulled the spring selling season forward into Q1. April s release also reported upward revisions for the prior three months, which together totaled 55,-units, or gain of 3.1 percent. New home sales have increased 11.3 percent over the past year, on a year-to-date basis through April. Homes priced between $2, and $3, accounted for 39 percent of the market in April, up 1 percentage points from the prior month. This is notable, as this cohort is largely driven by first-time homebuyers. 2% 1 Median New Home Sales Price Year-over-Year Percent Change, 3-Month Moving Average Median New Sales Price: $39,2 Year-over-Year Percent Change: -1.8% 2% 1 1% 9% 8% 7% New Home Sales vs. Mortgage Rates Seasonally Adjusted Annual Rate, In Thousands Mortgage Rate: 4.% (Left Axis) New Home Sales: 569, (Right Axis) 3% Months' Supply of New Homes Seasonally Adjusted Months' Supply: 5.7 1,75 1,5 1, 1, % 1% % % % -1% New Home Sales New Homes Sold During Month, Index 22=1, 3-MMA 18 $44 Average and Median New Home Sale Price In Thousands $ $4 $ $36 $ $32 $ $28 $24 $2 $16 Average Sales Price: $368,3 $28 $24 $2 $ South: 84.5 Midwest: West: 64.1 Northeast: Median New Sales Price: $39,2 $ $12 Source: U.S. Department of Commerce, FHLMC and Wells Fargo Securities 8

9 Housing Charbook: June 217 June 5, 217 Existing Home Sales 13 Pending vs. Existing Home Sales Index 21=1, SAAR in Millions 7.5 Existing home sales fell a larger-than-expected 2.3 percent in April, as low inventories held back resale activity. For-sale housing supply has decreased 9. percent over the past year, signaling the 23 rd consecutive month of year-over-year inventory decline. Low inventory levels continue to fuel price gains. The April median sales price jumped 6. percent from last year to $244,8, representing the 62 nd consecutive month of yearover-year increases. Pending home sales, a leading indicator for existing home sales, edged another notch lower in April and are now down 3.3 percent from one year ago. While we expect the recent slowdown in home sales to be temporary, the pullback in pending home sales is disconcerting and may suggest further weakness in the coming months Existing Home Sales: 5.57 Million (Right Axis) Pending Home Sales Index: 19.8 (Left Axis) Inventory of Existing Homes for Sale Existing Homes for Sale at End of Month, In Millions Total Inventory: 1.93M Existing Single Family Home Sales vs. Mortgage Rate Percent and SAAR In Millions % 3-Yr. Conventional Mortg. Rate: 4. (Left Axis) SF Existing Home Sales: 5. Million (Right Axis) % % % $3 Existing Single-Family Home Prices In Thousands 2. $ Existing Home Sales Existing Homes Sold During Month, Index, 22=1 Northeast: 73. Midwest: 97.8 South: 18.5 West: $ $ 9 9 $2 $ $15 Average Sale Price: $288,3 $ Median Sale Price: $246,1 $ $1 Source: National Association of Realtors, FHLMC and Wells Fargo Securities 9

10 Housing Chartbook: June 217 June 5, 217 Home Prices Home prices across the United States continue to outpace inflation and incomes, with the S&P CoreLogic Case-Shiller National Home Price Index rising 5.8 percent over the past 12 months and the 2-City and 1-City indices rising 5.9 percent and 5.2 percent, respectively. While there is some regional variance, all 2 metro areas have registered price gains over the past year. Seattle and Portland continue to lead, with prices climbing 12.3 percent and 9.2 percent year over year, respectively. The lack of for-sale housing inventory across the country continues to support home price growth. Foreign buying is also pulling prices higher, particularly in the Pacific Northwest. S&P CoreLogic CS Home Price Index Index Seattle Portland Dallas Denver Boston Detroit Minneapolis Charlotte San Diego Las Vegas Miami Phoenix Atlanta Los Angeles Tampa Chicago San Francisco Cleveland Washington, D.C. New York City C-1 C-2 National HPI Denver Dallas Portland Seattle Boston San Francisco Charlotte Atlanta San Diego Los Angeles Minneapolis Cleveland Detroit Washington, D.C. New York City Chicago Tampa Miami Phoenix Las Vegas S&P CoreLogic Case-Shiller Home Prices Year-over-Year Percent Change, NSA 9.2% % 7.% 6.8% 6.7% % % 5.1% 5.1% 5.1% 4.3% 4.2% 4.1% 5.2% 5.9% 5.8% 12.3% March 217 % 2% 8% 1% 12% 1 S&P CoreLogic Case-Shiller Home Prices Percent Change from Previous Peak, NSA March % -5.9% -6.% % % % -2.7% -21.2% -26.9% -33.3% 14.3% 12.7% 8.7% 7.7% % National HPI: 187. Composite-2 City: Composite-1 City: Home Prices Year-over-Year Percentage Change $44 $4 $36 C-1 C-2 National % % -2% -1% % 1% 2% 3% Average and Median New Home Sale Price In Thousands Average Sales Price: $368,3 Median New Sales Price: $39,2 $44 $4 $36 2% 2% $32 $32 1 1% 1 1% $28 $28 $24 $24 % % $2 $2 - - $16 $16-1% -1-2% Median Sale Price: $246,1 Median Sale Price, 3-M Mov Avg: 6.8% -2 FHFA Purchase Only Index: 6.2% S&P/Case-Shiller Composite-1: 5.2% -3% % -1-2% -2-3% $12 $12 $8 $ Source: National Association of Realtors, U.S. Dept. of Commerce, S&P, FHFA and Wells Fargo Securities 1

11 Housing Charbook: June 217 June 5, 217 Renovation and Remodeling Residential improvement spending posted a strong gain to start 217, rising at an 8.3 percent annualized rate in Q1. More timely monthly indicators for home improvement spending have been mixed, however. Retail sales at building materials, garden equipment & supplies dealers stores rose modestly in April, but the prior two months of data were revised lower. The Harvard Joint Center for Housing Studies (JCHS) expects home improvement spending to remain above its long term trend through 217, supported by higher home prices. Heading into 218, however, the JCHS looks for remodeling and repair activity to ease modestly. 3% 2% 1% % -1% -2% -3% - Residential Improvements Year-over-Year Percent Change Improvements: 7. Res. Investment Ex. Improvements: 6.9% NAHB Remodeling Market Index Index, Seasonally Adjusted 3% 2% 1% % -1% -2% -3% $1,1 $1, $9 $8 $7 $6 $5 $4 $3 $2 Residential Investment Billions of Dollars Other: $11. B Brokers' Commissions: $168.8 B Improvements: $238.2 B New Building: $323.8 B $1,1 $1, $9 $8 $7 $6 $5 $4 $3 $ Overall Index: Future Expectations: 58.2 Backlog of Remodeling Jobs: $1 $1 $35 $ Leading Indicator of Remodeling Activity In Billions, 4-Q Moving Total, Harvard Joint Center for Housing Studies JCHS Forecast $ $35 3% 2% Building Material, Garden Equip & Supply Stores 3-Month Moving Average Year-over-Year Percent Change: 7.1% 3-Month Annual Rate: 13. 3% 2% $3 $3 1% 1% % % $ $ -1% -1% $2 $2-2% -2% -3% -3% $15 $ $1 $ Source: Harvard Joint Center for Housing Studies, U.S. Dept. of Commerce, NAHB and Wells Fargo Securities 11

12 Wells Fargo Securities Economics Group Diane Schumaker-Krieg Global Head of Research, Economics & Strategy (74) (212) John E. Silvia, Ph.D. Chief Economist (74) Mark Vitner Senior Economist (74) Jay H. Bryson, Ph.D. Global Economist (74) Sam Bullard Senior Economist (74) Nick Bennenbroek Currency Strategist (212) Anika R. Khan Senior Economist (212) Eugenio J. Alemán, Ph.D. Senior Economist (74) Azhar Iqbal Econometrician (74) Tim Quinlan Senior Economist (74) Eric Viloria, CFA Currency Strategist (212) Sarah House Economist (74) Michael A. Brown Economist (74) Jamie Feik Economist (74) Erik Nelson Currency Strategist (212) Misa Batcheller Economic Analyst (74) Michael Pugliese Economic Analyst (74) Julianne Causey Economic Analyst (74) E. Harry Pershing Economic Analyst (74) Hank Carmichael Economic Analyst (74) Donna LaFleur Executive Assistant (74) Dawne Howes Administrative Assistant (74) Wells Fargo Securities Economics Group publications are produced by Wells Fargo Securities, LLC, a U.S broker-dealer registered with the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the Securities Investor Protection Corp. Wells Fargo Securities, LLC, distributes these publications directly and through subsidiaries including, but not limited to, Wells Fargo & Company, Wells Fargo Bank N.A., Wells Fargo Advisors, LLC, Wells Fargo Securities International Limited, Wells Fargo Securities Asia Limited and Wells Fargo Securities (Japan) Co. Limited. Wells Fargo Securities, LLC. ("WFS") is registered with the Commodities Futures Trading Commission as a futures commission merchant and is a member in good standing of the National Futures Association. Wells Fargo Bank, N.A. ("WFBNA") is registered with the Commodities Futures Trading Commission as a swap dealer and is a member in good standing of the National Futures Association. WFS and WFBNA are generally engaged in the trading of futures and derivative products, any of which may be discussed within this publication. Wells Fargo Securities, LLC does not compensate its research analysts based on specific investment banking transactions. Wells Fargo Securities, LLC s research analysts receive compensation that is based upon and impacted by the overall profitability and revenue of the firm which includes, but is not limited to investment banking revenue. The information and opinions herein are for general information use only. Wells Fargo Securities, LLC does not guarantee their accuracy or completeness, nor does Wells Fargo Securities, LLC assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. Wells Fargo Securities, LLC is a separate legal entity and distinct from affiliated banks and is a wholly owned subsidiary of Wells Fargo & Company 217 Wells Fargo Securities, LLC. Important Information for Non-U.S. Recipients For recipients in the EEA, this report is distributed by Wells Fargo Securities International Limited ("WFSIL"). WFSIL is a U.K. incorporated investment firm authorized and regulated by the Financial Conduct Authority. The content of this report has been approved by WFSIL a regulated person under the Act. For purposes of the U.K. Financial Conduct Authority s rules, this report constitutes impartial investment research. WFSIL does not deal with retail clients as defined in the Markets in Financial Instruments Directive 27. The FCA rules made under the Financial Services and Markets Act 2 for the protection of retail clients will therefore not apply, nor will the Financial Services Compensation Scheme be available. This report is not intended for, and should not be relied upon by, retail clients. This document and any other materials accompanying this document (collectively, the "Materials") are provided for general informational purposes only. SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE