Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here.

As we approach the festive respite of Christmas, it's timely to reassess our K-shaped economic landscape. Today's spotlight falls on the St. Louis Fed's housing affordability index, currently at 91.4. A score of 100 indicates a family with median income can precisely afford a median-priced home, assuming a 20% down payment.

Housing Affordability Crisis Looms Large - msr12345

The landscape, however, is challenging; the average monthly mortgage has hit an unprecedented $3,322, while renting averages $2,184. With home prices stubbornly high amid tight inventory and mortgage rates averaging 7.27%, most homeowners are unlikely to sell, given 92% have mortgages under 6%. 80% are locked into a mortgage below 5%. Mortgage rates would have to drop another 230+ basis points to incentivize those homeowners to move.

Inflation, albeit easing, continues to press on pockets. Prices are rising less quickly but still rising. Transportation costs have soared by 10.1%, car insurance by 19.2%, and even a simple dine-out has become 5.3% pricier. The pinch is felt far beyond the muted 3% CPI headline, particularly for those renting, driving, and dining out—costs there have surged by 5-19%.

This affordability crisis looms large, paradoxically, against a backdrop of rallying stock markets, underscoring the disconnect that's central to the narrative.

Learn more about the Market Situation Report written by Tier 1 Alpha.


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