We get it. The headlines for a meme coin, another GameStop-esque, explosive short squeeze and “Baby Shark” make for good stories. They’re clicky headlines. But they push much more important stories down the list… like the housing market and inflation.
We were checking the trending stories this morning on CNBC and this was what greeted our eyes:
Every story there is newsworthy in its own right, but the influence of Tesla CEO Elon Musk is beyond oversized. Less than a month has passed since the “Dogefather” sent a meme crypto “to the moon and back” with a single tweet.
Now, he’s targeted another joke stock in the same fashion.
Samsung Publishing Co. (KRX: 068290) — not to be confused with the South Korean technology company — is a major shareholder of the producer of viral song “Baby Shark.” Following the tweet, shares soared 10% before returning to normal on the close.
Great. Another meme stock jumped a temporary 10% because Musk sent a tweet.
And for some reason, it’s No. 2 on the trending list.
So what do we want first: The good news or the bad?
OK, let’s get the bad out of the way first…
Tuesday, I wrote a piece for Venture Society on a topic that has me a little worried.
We’re less than a month away from the expiration of the moratorium on evictions that the Center for Disease Control (CDC) put in place as a form of relief during the COVID-19 outbreak.
And partially due to the state of the housing market and inflation right now, I don’t think the economy is ready for that.
As I noted in that piece, “the Center on Budget and Policy Priorities (CBPP) estimates there are roughly 11 million people behind on their rent — plus another 64 million homeowners delinquent on their mortgages.”
And even though some aid is still technically available, it’s both difficult to find for those who need it, and a challenge for states to distribute. And during this inflationary period where commodity prices are up, everything costs more.
And as we know, the people who need the aid most during this time — the middle- and lower-class — are the last to receive it.
So by the time they do, prices have already increased.
Despite that, rent prices are rising and will likely be back to pre-pandemic levels by the end of the year, if not sooner.
Source: Apartment List
And again, as I said Tuesday, “The largest component for what the Federal Reserve views as ‘inflation’ — the Consumer Price Index — is ‘Shelter,’ and we’re coming off of multi-year lows.”
Source: FRED, Seawolf Research
When you combine those lows with the inflationary pressures of the economy right now… That number is going to get really high, really quick.
Which means even people who find aid and jobs while being able to afford rent, they’ll still struggle to stay afloat.
But what about those who can’t?
That was very doom-and-gloom, I know. But it’s a scary thought. Luckily, there may be a light at the end of the tunnel.
Referring back to the snapshot of CNBC’s trending topics Wednesday morning, the housing boom has finally lost some traction.
Because it was booming… for sellers, at least.
A combination of factors contributed to soaring housing prices. All-time low interest rates led to the wealthy purchasing properties to take advantage of it — which also contributed to the explosion in lumber costs.
Beyond that, housing inventories are at an all-time low.
At the same time, there is an all-time high level of first-time home buyers — roughly 32.7 million.
Source: Seawolf Research
Remember our chat about supply and demand? When supply can’t keep up with demand, prices go up — a la the housing market and inflation.
But mortgage applications have been slowing since January. So either the demand for homes is going down, or people are just giving up.
For the second week in a row, purchase demand was lower than a year ago, despite mortgage rates being lower presently.
So beyond housing prices hopefully falling, why is that good news?
Because home construction is starting to slow…
Source: Seawolf Research
Which, looking at the blue line, in turn, has led to lumber prices coming back down…
Lumber has been one of the biggest indicators of inflation — and commodities, specifically. As its price begins to fall, the rest will soon follow.
So although the outlook for rentals at present looks somewhat bleak, we’re hopefully near the end of the housing market and inflation tunnel…
All the best,
P.S. Legendary trader Jeff Zananiri just told us about a breakthrough strategy so powerful, he’s already used it to signal 20%, 30%, even 50% winners overnight…
How does he do it? By simply buying certain stocks right at the market’s close and then selling them again the next morning.
We almost didn’t believe Jeff when he told us about his overnight strategy, but then we started digging into the 3 p.m. market phenomenon that Jeff calls a “Burn Notice.”