Happy Friday! Brian Manning with the weekly update. Let's get right to it.

So, Monday this week, we had Redfin put out an article. This is talking about the month of June and home inventory said inventory was down 15% on a year-over-year basis. We're feeling that in most places. And it said new listings come into market were down 30%. So... You know, inventory is down. There's still an increased buyer activity. We'll talk more about this, but there's still an imbalance of... supply and demand as far as buyers are concerned.

And here's Redfin talking about what's going on in the month of June. Tuesday this week, we had Federal Reserve just talking about how they're going to be data dependent. And it's just so amazing to me when they're so focused on being data dependent, when a lot of the data they're looking at is really old news. I say this because CoreLogic came out and they said the blended rate for rent is up 3.4%. So, blended rate for rent means they're looking at people that renewed leases and signed brand new leases. So, looking at how much are rents going up on year-over-year basis and they're up 3.4%.

Well, the most recent CPI report we got... CPI is the Consumer Price Index, and about 43% of this inflation report is shelter costs. The most recent CPI report said that housing costs were going up at 7.8% per year. So, what I want to look at here really quick is just what's happening with the shelter costs and how it's impactful in CPI. So... So, right now, we have rents going up right here at 3.4% per year. You can see they crested in the beginning of 2022 and now, they're coming down. The challenge with CPI is, and again, this is 43% of the inflation weighting, is that it's really about a 12-to-16-month lag. So, right now, we're grateful to have seen that shelter costs have peaked and they're coming down. But the CPI report showing shelter costs up at 7.8% when real time, they're really going up 3.4%.

So... If we look at what this is doing, we look at the core CPI and the core PCE. So, core takes out volatile items such as food and energy. So, the core CPI number has inflation going up at 4.8% year-over-year. The Core PCE number has inflation going up at 4.6% year-over-year. You know, what's interesting is if we remove this lag effect and we won off real time numbers, so exactly what rents and shelter costs are doing right now, the true CPI number would only be at 2.89% and the true PCE number would only be at 3.67%. So... So, the lag effect and the Federal Reserve being data dependent and using, you know, 43% of their weighting here from data that's 12 to 16 months behind, it just blows me away.

So, if we look back even farther, just to add some more color to this; in June of 2021, the CPI weighting for shelter costs were only up 2.5%, right? But real time shelter costs and rents were going up at 7.5%. So, back here, the Federal Reserve is saying, oh, we don't have enough inflation. We need to buy more mortgage-backed securities and bonds. We need more quantitative easing. You know, here they are again looking in the rearview mirror because rents back here were not going up that quickly. But once they start to hit and go up fast, federal Reserve wasn't looking at this. So, it still blows me away that they're so data dependent and what they're looking at there.

Wednesday this week, we got housing starts. This is for new construction, home starts. This is a pretty volatile number. It changes all the time. It's up at 1.43 million annualized paces, which is really not bad to see. So, you know, if you have 1.43 million homes that are Onan annualized pace, that's new homes coming to the market, and you have 1.4 million permits being pulled. You know, on average, every single year, about 100,000 homes get retired. That's just because they age out, destruction, whatever it is.

So, if you have 1.4 homes coming into market and you're losing 100,000 every year, now, you really have 1.3 million homes coming into market on an annualized pace. But we have 1.5 million new household formations that are being formed every year. So, when you have household formations that are up and they're still outpacing new construction, once again, we still have an imbalance of supply and demand, and housing is going to prove to still be resilient and strong.

Thursday this week, we've got existing home sales on a month-over-month basis. This was down 3.3%. Inventory is really still consistent at right about a million homes. But that's all homes. That doesn't take into account homes that are pending sale and already under contract. So, you wipe away about half of those homes. There's still a lot of inventory across the United States. Days on market is only at 18. That's ridiculous that across the country, average home is selling 18 days. One in three homes are selling for above asking price, which is unbelievable.

Also, the same day, Thursday this week, Wall Street Journal put out an article and they said that they truly believe that the housing recession is behind us. I've talked about this in the past. I 100% agree with this. I truly think that the low in the housing market was Q4 into January of this year. January was the turning point. And from February going forward, we've seen home appreciation everywhere. I bring this up because a lot of people are waiting for rates to move lower.

When rates move lower, it's expected that 3 to 5 million buyers will move back into the marketplace because they're sitting on the sideline waiting for interest rates to move lower. Well, if we already have low supply and you push 3 to 5 million buyers into the marketplace; here we go again, here comes chaos. So, if you're a home buyer... I can't even stress enough, if I was a homebuyer, I would be buying house right now because I know that I would have the opportunity to refinance in the future. And I truly feel if I was a home buyer right now and I didn't have to compete with people jumping into the market once rates move lower, I can get a better deal on a home right now. If you want to do a rent versus own analysis, give me a call. I'd love to help you.

Today, we really got a relatively quiet news day because next week is action packed. Next week, we have the Federal Reserve, it's already anticipated they're going to hike rates. Next Friday though, we get the PCE. That's the personal consumption expenditure. This is the Federal Reserve favorite gauge of inflation. It is very much anticipated that we're going to see a big reduction in inflation there as well. Inflation is the arch enemy of mortgage rates. To see inflation come down is going to be very beneficial for us. We're super excited for the news next week. Can't wait to see what's going to happen. I'm around all weekend. If you have any questions, let me know. If you want to learn how we're closing purchase transactions in ten days, call me. I'd love to help you. Happy Friday. Have a great day.

-Brian

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