Good Tuesday AM,
Not great news today.
Most asset classes are in the red yet again as markets brace for the Fed to drop its next bomb on us tomorrow at 11am. You don’t need to be an economist to see the challenges with raising rates further into a recession to make up for allowing inflation to run up. What a mess. The rest of the world is dealing with rampant inflation as well as commodity prices (oil and food) continued to run amok. This week’s onslaught of central bank meetings got off to a hot start today, with Sweden’s Riksbank springing a 100 basis-point hike on the market. The move, which came as a shock to most economists, is just the first in what is shaping up to be a mammoth few days for rate decisions. Of course, the US Federal Reserve will choose between a three-quarter-point or full-point hike on Wednesday. The Swiss National Bank, Norges Bank, Bank of England and others follow. Needless to say, U.S. Treasury yields are at multiyear highs, with the 10-year reaching the highest settlement level since 2011 and the 2-year since 2007.
A quick note:
On this day in 1873, the stock market crashed and the NYSE Board of Governors closed the exchange for the first time in history. The cause of the plunge: a third of all money on loan from New York banks had gone into buying stocks on margin.
Back to markets…
A recent study revealed adults with school-aged children will account for nearly one in four home sales over the next 10 months. Families with kids over 18 and empty nesters will also be active, singles and retirees not as much. In 2021, according to the National Association of Realtors, the typical buyer was 33 years old, while the typical repeat buyers were at an all-time high of 56 years of age. And according to Freddie Mac, millennials purchased more than half of all mortgage loans in the past two years. Millennials surpassed baby boomers as the largest demographic in 2019 at 72.2 million in population. So, the average buyer is young and uses technology as a tool to buy everything, including homes and rates.
And (don’t shoot the messenger, I just share the data):
According to recent August data in the latest RE/MAX National Housing Report, home sellers, on average, accepted offers below their listing prices last month –a further indication of rebalancing in the housing market. Across the report’s 51 metro areas, the average Close-to-List Price Ratio in August was 99%, meaning that homes sold for 1% less than the asking price. That’s down from 101% in July and 104% in April. This change helped push August sales 5.3% higher than July, while the Median Sales Price declined 2.4% to $410,000 after peaking at $426,000 three months earlier. At the same time, new listings dropped 12.8% from July and inventory declined 1.8% after four months of double-digit growth. Even so, the number of homes for sale was 20% higher than in August 2021.
“Patient buyers were rewarded in August, as prices softened from July. Sales increased as buyers ‘bought the dip’ – which was not the trend many people were expecting. The activity modestly depleted inventory, although the number of homes for sale remains significantly higher than this time a year ago,” said Nick Bailey, RE/MAX President and CEO. “The late-summer burst of activity underscores the housing market’s resiliency. Despite the uptick in interest rates and concerns about the economy, demand remains strong. We’ll see what happens from here, but the August bump in sales was great news for the industry.”
Bloomberg followed that with a piece:
Mortgage rates have shot up. But across the US, home prices have barely fallen yet. As such, the monthly cost of a new home purchased with a 30-year fixed mortgage has absolutely exploded. Yesterday a posted list of what monthly payments look like for today’s homebuyers across the country.
Here, for example, is Boise, Idaho. Prior to the pandemic, the average homebuyer was looking at a roughly $1000 monthly payment. Today it’s just under $2600. An absolutely staggering affordability shock. It seems obvious that something has to give here big time, whether it’s price or just the number of transactions, or something. Early this year, one of the themes was that would-be homebuyers saw a housing purchase as protection against surging rents. Inflation protection in other words. That’s obviously obliterated with moves like this.
And the final word today from a government backed task force which shared that adults under the age of 65 should be screened for anxiety disorders and all adults should be checked for depression, a government-backed panel said, as many Americans report symptoms of these mental-health conditions following the height of the Covid-19 pandemic.
The draft guidance released Tuesday marks the first time that the United States Preventive Services Task Force has made a recommendation on screening adults for anxiety disorders. The move comes months after the task force issued similar draft guidance for children and adolescents. So there that…
Please remain safe and stay healthy, make today great!