GM and welcome to HomeSweet 🏠 - where homeowners get their news! We'll give you the tools, resources, insights, and memes to both build wealth and build a better life at home.
In today’s newsletter, we'll cover rents dipping slightly, an inflation update, the best remodeling projects, debunking the "excess supply" argument, and some new tools you'll love. Let's go!
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The Blueprint 🗺️
🗞️ Front Porch News: Some not bad news! The Fed's arch-nemesis: inflation.
🛠️ Weekend Warrior: Flooring and insulation upgrades.
🧠 Shower Thought: What's really happening with this correction.
🧰 The Toolshed: Staying organized with a budget, make some extra dough, and how to protect your investments right now.
🤡 Meme Menu: Smile at the small wins and laugh at the rough news.
Front Porch News 🗞️
GOOD NEWS (for renters at least) (Forbes, Bloomberg). September 2022 broke the trend of median rents not coming down since 2020. See chart below. Like we've been saying, this marks the beginning. Austin TX and Reno NV, in particular, have already seen +10% declines, as these markets experienced extreme levels of froth during the pandemic. In general, modest (i.e. <5%) home price drops are becoming more commonplace.
Chloe Says: For the supermajority of folks out there, this "good news" is not actionable good news, meaning it may feel good but don't act on it. More price reductions to come! Much like the entire real estate market right now, we are in price discovery mode for rents (translation: buyers do NOT know what a fair price is and sellers aren't willing to meet the market where it is).
Chloe Action: Until home prices/rates reach a point where folks find it cheaper to pay a mortgage (plus general upkeep/repairs) than to rent, rents will stay elevated in less frothy markets. This likely will not occur until unemployment ticks upward closer to ~5% in your market (one sign that the Fed's tightening is working, aside from inflation coming down of course). If you need to rent right now, explore slightly cheaper neighborhoods, post on social media about your search (you never know if a friend of a friend wants to move to Lisbon next week and would love to rent his/her place to you for nothing). Chin up :)
Inflation rules everything around me (CNBC). Last week's CPI came in at 8.20% with Core Inflation at 6.66% (lol), officially rendering them both at four-decade highs. Unemployment also registered low, which means that all the layoffs you have seen in the news or heard about from friends and family have NOT yet hit the print - a lagging economic indicator anyhow.
Chloe Says: Rates will once again get hiked at the next meeting, meaning higher mortgage rates too. The royal beating overall will continue (through 2023) until inflation dips back to ~4.00% range (unemployment will be up both on paper and IRL - you will feel it in the air and literally on the streets). At that point, the easy money policies that asset-holders have known and loved for 14 years will be back. The Fed is a fairly predictable if not vexing beast.
Chloe Action: Stack cash for that first or second home you want to buy. With inflation in the high single digits, your real rate of return on virtually any asset is underwater. So: your W2 and any secondary streams of income are of utmost importance right now. Be safe. Don't buy stupid shit. Do not wear nice watches at nighttime, etc. Use your head. Reach out with any other questions, gang. Much love.
Weekend Warrior 🛠️
According to the 2022 National Association of Realtors report, the top 3 interior remodeling projects with the highest ROI are:
Hardwood-flooring refinish;
New wood flooring; and
Insulation upgrade.
The BIG remodeling projects are riskier right now, given size of investment and labor/supply shortages. Let us know with any questions!
Shower Thought 🧠
We continue to see the mainstream normie argument that while, yes, things in housing are bad, at least there is 'lots of inventory on the supply side'. Sorry to burst that bubble but: excess supply only matters if there is healthy loan inventory. There isn't simply because (a) banks are not lending out to folks with mediocre credit like they did 15 years ago and (b) ~65% of all homes are purchased with a mortgage, which are +7% right now. So, not many new loans are truly available to make use of said excess supply. It's ok to admit it guys: things are cold out there.
Mortgage brokers off-the-record have said that total mortgage volume for 2022 is expected to be half of 2021 volume (with room to be even lower). Fear seems to be setting in (almost 2009 vibes) and the resulting environment will be reminiscent of 2010/11, which means that anyone under the age of ~34 will watch the Recession Show for the first time as a working adult. We recommend viewing the correction as an Education - merely a cost of doing business especially since Fed Chairman Greenspan started aggressive money easing in 1987 via the "wealth effect." Remember that despite downturns like this one, for better or for worse, the Fed ultimately wants to protect asset holders (namely stocks and homes); yes, that means that everyone else by and large tends to get hosed. Do what you will with that information.
The Toolshed 🧰
Four things we found this week that will make your life better as a homeowner:
Mint makes it easier to keep an organized budget with your monthly mortgage payments, utility bills, taxes, and insurance premiums that each have different due dates.
Four things to do to protect investments during a housing correction.
Meme Menu 🤡
Thanks for coming through. See you next week!
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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
