NAHB Market Update:
Eye on Housing
Existing Home Sales Retreat to 9-Month Low
Existing home sales fell to 9-month low in June as home prices hit another monthly record high, according to the National Association of Realtors (NAR). Sluggish pace of sales suggest that higher mortgage rates and elevated home prices are continuing to sideline buyers, despite improved inventory conditions.
Mortgage rates have hovered between 6.5% and 7% due to ongoing economic and tariff uncertainty this year, prompting the Fed to pause interest rate cuts. With mortgage rates expected to stay above 6% for longer due to an anticipated slower easing pace in 2025, these prolonged higher rates and high home prices would continue to weigh on the market. As such, sales are likely to remain limited in the coming months.
Economic Outlook
Powell Power
The critical thing about Powell’s talk tomorrow is tone. Can he really offer dovish rate guidance? Equities are at/near record highs, credit spreads are near their tightest ever, the dollar at its lowest level in years, unemployment is just 4.2%, inflation expectations are at 2.4%, well above the 2% target, and 25Q3 GDP growth is forecast to be over 2% by the FRB of Atlanta and NY. Color me skeptical.
Weakening Wages
Pre-2015, wage growth was consistently higher for high-income workers than low-income ones. Starting in 2015, that began to reverse, and during Covid that new relationship was turbo-charged. Income growth for the bottom fifth of the population at times was twice as fast. Since late 2024, the old relationship has returned, with higher income earners gaining pay raises of roughly 1.5% to 2% more, a large amount, compared to the low-paid.
