Housing affordability plummets

Market Overview
Read time 0.8 minutes

Year To Date Performances:

1. The affordability of homes in the U.S. has plummeted to its lowest point in forty years. A recent report by Freddie Mac reveals that the rate for a 30-year fixed mortgage soared to 7.09% last week, a level not witnessed in over two decades. This surge in rates means potential homebuyers can now afford considerably fewer houses for their money. For context, three years ago, with a 20% down payment and a $2,500 monthly mortgage, one could purchase a house valued at $758k. Fast forward to today, and that same down payment and monthly mortgage limit you to a property valued at $443k. With the 10-year Treasury yields, which typically influence mortgage rates, on an upward trajectory, there are growing concerns that home affordability might deteriorate even further.

2. Over recent weeks, as prices have fluctuated, investor sentiment has mirrored this volatility, showing a notable decline. This downturn in optimism is evident among both retail and professional investors. For instance, the AAII Sentiment Survey demonstrated a substantial drop in the bull-bear spread by over 13% last week. This shift pushed bullish sentiment below its average for the first time in nearly three months. On the professional front, the NAAIM Exposure Index, which reflects the average exposure of active managers to US equities, continued its descent, settling at 59.9, down from 65.5 the previous week. These metrics collectively hint at a prevailing risk-averse mood in the investment community.

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4. Headlines

   1. China Evergrande Group—one of China's largest real estate developers—filed for Chapter 15 bankruptcy in New York

   2. Walmart has higher EPS and Revenue than expected in Q2 after both in-store and online sales increased.

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