Eq: Total Market

(New York)

The US commercial and residential real estate markets have been headed in opposite directions for a little while now, with the former looking weak and the latter looking strong. However, new data suggests that US residential real estate now looks headed for its worst downturn in years. The market is suffering from heavy prices and rising rates, which are constraining buyers. Those realities are now starting to play out in the data, as the latest US market info shows that existing home sales dropped in June (for the third straight month), new home purchases are at their slowest pace in eight months, and inventory is finally starting to increase. Annual price gains in May were also their slowest in almost a year and a half.

FINSUM: It is still early days to predict a big downturn, but these three data points are a big warning sign. We are especially paying attention to rising inventory, as really tight supply has been the hallmark of the market for at least five years.


The US property market is a complex and bifurcated sector right now. On the commercial side, prices look set to weaken on huge supply of property and financing. On the residential side, inventory is tight and prices are rising. On the latter market, new data out shows that home sales and inventory are plummeting, and prices are rising quickly. Home sales have fallen for a third straight month, and according to the National Association of Realtors, “The root cause is, without a doubt, the severe housing shortage that is not releasing its grip on the nation’s housing market. What is for sale in most areas is going under contract very fast, and in many cases has multiple offers”. US median home prices are up 5.2% year on year and have set a new high of $276,900.

FINSUM: So the market is seeing rising prices and rising rates. What gives? At some point fairly soon the market almost has to stall by default.


In a highly unusual break from presidential tradition, President Trump weighed in yesterday on the Fed’s current policy approach, and he was not happy. Speaking in regard to recent rate hikes and plans to continue doing so, Trump said “I’m not thrilled … Because we go up and every time you go up they want to raise rates again ... I am not happy about it. But at the same time I’m letting them do what they feel is best.” Speaking plainly, Trump continued “I’m just saying the same thing that I would have said as a private citizen … So somebody would say, ‘Oh, maybe you shouldn’t say that as president. I couldn’t care less what they say, because my views haven’t changed. I don’t like all of this work that we’re putting into the economy and then I see rates going up”.

FINSUM: The media is trying to make a very big deal out of this, but in our view, these are pretty benign comments, especially coming from Trump.

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