Chart of the Week
Housing remains a challenging market, but there is a silver lining.
Prices, when adjusted for inflation, peaked nearly two years ago. This would be the fourth time since 1980 that prices did not increase on a real basis.
Only one of those three times did we see prices fall on a nominal basis, which began in 2007 and ended in 2011.
This occurrence may be more like the peaks in 1980 and 1989. In these cases, real prices hit the lows three to five years after the peak. If this peak plays out similarly, 2025 to 2027 could be an opportunistic time frame.
This would allow wages to catch up to the sky-high home prices, along with mortgage rates perhaps coming down. Both factors would improve the affordability of homes.
What We’re Reading
How I Think About Debt – Morgan Housel
7 Reasons the Economy is So Strong – Apollo
What drives fund tax efficiency? – Blackrock
2024 Election Uncertainty Could Drive Fixed-Income Outperformance – Guggenheim
Podcast of the Week
The Stories You Tell Yourself Have More Power Than You Think – Farnam Street
Last Week
The Federal Reserve held interest rates steady last week. Some market participants thought the Fed may have to hike interest rates again, given the high inflation prints in the first quarter. Fed Chairman Powell indicated this was unlikely, sending both stock and bond prices higher. The payrolls report came in short of expectations, with the unemployment rate increasing to 3.9%. The services and manufacturing PIM surveys showed a contraction in April, the first decline since December 2022 for services.
The Week Ahead
The monthly inflation report will garner the most attention next week. Retail sales and consumer sentiment will also be watched for changes in trends.
Thank you for reading.
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