• Bull.




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.

Another week, another record-high median home asking price, now at $418,455. If you're keeping score, that's an increase of 22% in three years, despite the 30-year mortgage averaging 6.85% in April – very similar to mortgages we saw in 2002. Not unprecedented by any means. The average monthly mortgage payment is $2,883 on a 30-year fixed loan in a country where median family income is $93,000 a year. That's 37% of family income on mortgage -- ignoring insurance, maintenance, property tax, etc. It's hard to fathom why everyone seems angry.

In yesterday's housing starts data, the US saw a 5.7% month-over-month increase to an annualized rate of 1.36 million in April 2024, rising from a downwardly revised 1.287 million level in March. Figures came in below forecasts of 1.42 million, as high rates and home prices continue to weigh on home builders. Single-family housing starts moved down 0.4% to 1.031 million, but the rate for units in buildings with five units or more surged 31.4% to 322,000. The one data point we'll be watching closely is building permits, a leading indicator, which are down 3% month-over-month. The US market is still short of supply, but how sustainable is this? Particularly as commercial conversions to residential are growing rapidly. 

Market Situation Report Bonus Chart: Housing - msr1

We always keep the German housing market in the back of our minds – a supply-constrained market where the ECB is raising rates from near-zero levels. Home values there are down more than 20% from the 2022 peaks. The demand side of the equation ultimately plays a role even in a supply-constrained environment and the evidence is that homebuyers are NOT getting used to higher rates -- rather they hoped they would retreat in a timely fashion.  With those hopes fading, we suggest that the hot US housing market may be poised for a retreat. 

Market Situation Report Bonus Chart: Housing - msr2

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

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