It’s a big day for the economy, with data on inflation and the latest Fed minutes due for release. More on that later.
But first let’s discuss the housing market, and this startling chart.
It shows the huge gap between mortgage rates, and the rates that Americans are actually paying — a gap that hasn’t been this wide since the early 1980s, back when mortgage rates reached as high as 18%. At the end of 2022, the effective mortgage rate was just 3.48%, so no one is going to want to pay 6.5% if they can avoid it. And, they aren’t, with mortgage application demand down about 30% from a year ago.
Milwaukee-based Fiduciary Management, which manages about $14 billion in assets, makes that point in its review of the first quarter. The firm says it’s “particularly attracted” to the repair and remodel market.
Homeowners have strong balance sheets and built up significant equity as home prices have appreciated. Low ticket R&R, it says, has historically been resilient during periods of economic weakness. And there’s a need to remodel, given the median age of an occupied home being around 40 years. Plus, as seen in the chart above, locked-in mortgages as well as limited home supply have discouraged moving — likely leading homeowners to invest more in their current homes.
The firm notes the dynamics in the U.K. are similar, with an even older housing stock (70 year), a constrained supply of new homes, an aging population and people staying in their homes longer.
So which companies benefit? It’s previously highlighted three — Simpson Manufacturing SSD,
U.S. stock futures ES00,
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Consumer price index data is due to land at 8:30 a.m. Eastern, with expectations that the year-over-year rate will slow to 5.1% in March from 6%, while the core is expected to tick higher to 5.6% from 5.5%.
“Markets will interpret a downside surprise as allowing the Fed to prioritize bank stability through at least a May rate pause, whereas an upside surprise will firm a 25bp hike from the current 75% probability,” says Will Compernolle, macro strategist at FHN Financial. “An as-expected report will lead to a modest bond rally as markets breathe a sigh of relief from avoiding a worse outcome.”
Besides the CPI data, there’s also the Fed minutes due for release, at 2 p.m.
On the sidelines of the spring meetings of the International Monetary Fund and the World Bank, finance ministers from the Group of 7 nations will assess their efforts to help Ukraine and sanction Russia.
Berkshire Hathaway BRK.B,
Emerson Electric EMR,
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