Click here for the PDF: The Weekly Beacon October 20 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: Fannie Mae, Housing Market, Debt Markets, Mortgage Market, Bridgewater Associates, Long Term Interest Rates, Nvidia, China – U.S. trade wars, Semiconductor chips, AI chips, Nvidia’s revenue issue, Consumer behavior, Consumer savings, S&P 500 p/e ratios, Magnificent 7, Oil market, Oil and geopolitics, Iran oil embargo, Oil prices.

A tale of two markets

The real estate market is in an interesting spot, one that we have not seen in quite a long time. Housing prices have slowed down as rates have surged but we by no means have seen a crash. Rising rates have impacted millions of Canadians who owned variable rate mortgages the most, as many of these terms of reset and thousands of mortgages across Canada have begun to negatively amortize. Rental prices are also surging reflecting the lack of supply in various North American markets which is why home prices have remained high despite the economic backdrop across North America.

However, none of what we mentioned above is why we decided to write this piece in this week’s publication. We are writing this piece because of some comments that were made by the CEO of Fannie Mae this week. Priscilla Almodovar explained that the housing market is a tale of two separate markets right now, buyers, and sellers.

Fannie Mae is a U.S. government-sponsored enterprise that operates across the mortgage market. As of March 2023, Fannie Mae was ranked number 28 on Forbes’s largest U.S. companies by revenue.

Back to her comments.

Priscilla went on to explain that homeowners are in good shape as they own a lot of equity in their homes, and most have a rate in the 2-6% range. Roughly 92% of U.S. homeowners who have mortgages have a rate below 6%, according to a June analysis by Redfin. As the 30-year mortgage rate hits 8%, many Americans are deciding to stay put rather than buy a new home at an elevated mortgage rate.

 

Click here for the PDF: The Weekly Beacon October 20 2023