Good Monday AM,

I hope you had a terrific weekend..

New Home Sales were surprisingly low. Like all asset classes, it is not possible for housing, or any market to go straight up without at least a pause. Call it buyer fatigue or summer slowdown but we are certainly seeing the impact of the foot coming off the pedal ever so slightly. Corrections are necessary and healthy for all markets and when we go too long without one, we get a bubble. We are nowhere close to a bubble and I do not expect one (the slides below do a lot of talking). Of course two of the most important variables are inventory and rates. The second part of that will be for the most part addressed this week with the Fed meeting on Wednesday. Despite no expectation of a change in policy, I would not float rates into the meeting. I do expect the market to hear whatever Chairman Powell says with a more bullish tone for rates. Markets are looking for some insight as to when the FED will slow down its bond purchases. Goldman Sachs is out in front of everyone saying it should happen this year. Wow, that seems ridiculous but they are much smarter than I am. We are starting to see signs as Mr. Powell has shared, inflation is transitory. If those metrics continue to show a slow down as expected, rates will improve further. The 10yr is at 1.28% today. If we can close below 1.22% for two days in a row, it opens us up for a drop to .99%. Wow.

Not to spend too much time on the graphs below but these show a great overview of the market. Prices have risen as demand increases and rates allow for a low cost of ownership. Prices have increased more in the higher end than median priced segment, prices are not too expensive relative to income and rents will continue to increase. I would be happy to have a deeper conversation on these bullet points anytime.

Last, what does become a problem for sustainable long term economic growth is that America’s weak population growth, already held back by a decadelong fertility slump, is dropping closer to zero because of the Covid-19 pandemic. In half of all states last year, more people died than were born, up from five states in 2019. Early estimates show the total U.S. population grew 0.35% for the year ended July 1, 2020, the lowest ever documented, and growth is expected to remain near flat this year. Some demographers cite an outside chance the population could shrink for the first time on record. Population growth is an important influence on the size of the labor market and a country’s fiscal and economic strength.

Please remain safe and healthy, make today great!