First YoY Decline Since Mid-2020

U.S. new home sales rose 4.1% MoM to an annual rate of 683,000 in April, topping the 669,000 expected by analysts. However, March’s initial 9.6% increase was revised downward significantly to 656,000. 🏘️

The theme investors are watching is that the ongoing lack of existing homes for sale is forcing buyers into new construction. We’ve heard this from builders, who remain cautiously optimistic despite high-interest rates and prices weighing on affordability.

Speaking of prices, there is some positive news for hopeful buyers and the Federal Reserve. 👍

April’s data showed that the median sale price of new homes in the U.S. experienced a YoY decline for the first time since April 2020. New data showed that prices declined 8.16%, nearly matching the last time this data saw an annual decline. It’s currently sitting at $420,800, down from October’s $496,800 peak. 🔻

However, the long-term trend in this housing data shows prices are still above trend. Below we’re looking at the same data over the last thirty years. Clearly, the pandemic housing boom caused prices to rise at a much steeper pace than at other periods in history. 😬

That rise in asset prices and housing spending was a key driver of inflation, so the Fed hopes this data will continue to revert to its historical average. Because if it does, that’ll make the central bank’s fight against inflation a whole lot easier.

So far, Home Depot and other retailers have offered cautious consumer outlooks, expecting the housing market cooldown to continue. We’ll have to see if they’re right, but today’s data further enforces that view. 📝

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In its last update, the Fed said policymakers expect two more rate hikes this year, but the markets have been anticipating just one more hike this year. Today, Chairman Jerome Powell said that inflation has moderated, but there’s still a long way to go before hitting the 2% target.

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September’s headline jobs number was better than expected, yet stocks and bonds are rallying. We thought a strong labor market was a negative, so what gives? Let’s break it down. 👇

Nonfarm payrolls increased by 336,000 in September, widely surpassing expectations of 170,000. That topped August’s number by over 100,000 and was the largest since January. Service-related industries accounted for 234,000 of the total job gains, with goods-producers adding just 29,000. 

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Global Yields Continue Their Ascent

Today’s big story is the U.S. 10-year yield closing at its highest since 2007. July’s Federal Open Market Committee (FOMC) Minutes showed that officials see ‘upside risks’ to inflation, causing an already weak bond market to continue falling. 📊

In the U.S., stronger-than-anticipated growth and a historically strong labor market have investors concerned that rates could need to stay higher for longer. As a result, most of the yield curve has been pressing to new highs, with big investors like Big Ackman betting against bonds. The recent uptick pushed 30-year U.S. mortgage rates to 7.16%, their highest since 2001. 📈

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Restaurants Stocks Worried About Consumers?

Restaurants have outperformed the rest of the retail space for the last couple of years. Driving that strength was consumers getting out of their houses, shifting their discretionary spending from goods to experiences as they “revenge spent” their way back into the world. 💸

But now, as the job market weakens and student loan repayments begin, some analysts expect consumer spending to be impacted. That could hurt discretionary sectors across the board, especially if inflation remains elevated. 

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