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Economists Still Favor Soft Landing

“‘Soft landing’ remains the consensus (65% in August from 68% in July) while ‘no landing’ probabilities have risen (9% from 4% in July).”

No more hikes. "The latest inflation data support our expectation that the core trend will have slowed enough by November for the FOMC to conclude that a final hike is unnecessary. We expect the first cut in 2024Q2 with core PCE inflation below 3% YoY and 2.5% MoM annualized."

Officially the least affordable housing market in US history

The housing market affordability index is now ~10% BELOW the 2006 lows. This is officially the least affordable housing market in US history. Mortgage rates in many states are approaching 8% and the median house now costs 560% of the median income. In 2008, the median home price was 360% of the median income. Even if home prices fell 30% from current levels, affordability would STILL be worse than pre-pandemic. The US population is up about 12% since 2006, but the percentage of renter-occupied housing units is up 28% since 2006. Given the lack of affordability, it would make sense that renter-occupied housing would continue to grow faster than the population.

Consumers Feeling the Pinch of higher rates

Household deposit balances remain elevated, according to BofA.

Incomes are higher, but higher prices are pressuring consumer balance sheets. This is why consumers are still struggling even as inflation has come down - key items will remain 20-40% higher than 2019.

Consumers are starting to feel the impact of higher rates

Consumers still aren’t pulling back, but don’t be fooled: it’s back-to-school shopping

Those excess household savings also will soon be gone. JPMorgan estimates by May 2024. This presents a serious cliff for consumers with savings gone, credit card balances up during a time of high interest rates and the resumption of studen loan payments. Oh, and the government could possibly shutdown on Sept. 30.

And wage growth is slowing: Posted wages grew 4.7% year-over-year as of July. That’s down from 5.1% in June and 6.2% at the beginning of the year."

2023 Housing Starts to Push Ahead of 2022 Levels

Even so, mortgage applications continue to fall

Growth is still single-family as multifamily permits continue to fall:

Millennials Still See Positive Home Value Growth

More home shoppers are looking for homes in places other than where they live.