Click here for the PDF: The Weekly Beacon – March 10 2023

We will be giving some macro economic market updates on a weekly basis. No equity recommendations will be given in this commentary, and we encourage you to contact us if you have questions regarding any observations.

Feel free to send in your pictures of lighthouses to be featured in our weekly commentary.

This weeks issue: Home prices, Real estate, Mortgage rates, Interest rates, Inflation not defeated, Texas real estate, Austin homes for sale, Zillow, Home sales per month, WeWork, Valuations matter, Company collapses, Failing trends, Office space, Electric vehicles, Rivian debt issuance, Shareholder dilution, Automobile sector, Ford vehicle features, Patents, FTX, SBF, Alamaeda Research, Bitcoin, Australia energy, Oil and gas, Solar energy, Coal usage, Net zero, Energy goals, Government debt, Costs to service debt, Government expenses, Government revenues, Alternative assets, Inflation.


Residential dreams

Mortgage payments continue to soar as interest rates hit 15-year highs.

Even though real estate prices have decreased in recent months, consumers are still paying a lot monthly due to high rates. The average U.S. mortgage payment is up 26% year over year. The average consumer is paying $2,486 per month for a mortgage compared to $1,500 in February 2020 (pre-Covid-19).

Due to rising rates, buyers are being squeezed out on what they could afford a few years ago. According to Redfin, a US homebuyer with a $2,500 monthly budget can afford a $384,000 home today versus a $518,000 home that the same buyer could have purchased back in 2021 at 3% interest rates. To put those numbers in perspective, here are two homes for sale in the Austin, Texas suburbs.

We are not making fun of the second home. We are simply illustrating the homes the same consumer can afford just two years apart. We do not expect a price reset in residential listings, especially in southern states. We think consumers will cut back on other expenses so they can stay in the market for their dream home. Consumers will stretch themselves as far as possible to afford their mortgage which could have deep consequences, especially in the long run if they face some sort of stress test.

Dropping prices could also impact sales volumes across the country as sellers are not getting close to what they think their home is worth (U.S. existing home sales have declined 12 months in a row). Existing home sales are at their lowest level since 2010………