Good morning. I'm senior reporter Phil Rosen. It's good to be with you for the second-to-last Friday eve of 2022.
This year, we've watched (and felt) inflation hit historic highs, and seen the US central bank fight rising prices with very aggressive monetary policy.
The jury's still out on whether those Fed rate hikes are working and if they'll spark a recession, but everyday Americans have already had to endure the repercussions.
Don't shoot the messenger here, but today I'm breaking down the many troubles plaguing the housing market and homebuyers.
By the way, two of Sam Bankman-Fried's top associates, Caroline Ellison and FTX cofounder Gary Wang, plead guilty to fraud and are cooperating with authorities, US attorneys say.
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1. US home sales notched their longest streak of declines in 23 years last month. Data released Wednesday showed existing home sales dropped for a 10th consecutive month in November.
November's annualized sales pace dipped 7.7% from October, and 35.4% compared to the previous year, the National Association of Realtors said.
Recall that earlier this month, this Fed made its fifth jumbo rate hike in a row, and is tightening policy at an unprecedented pace.
The Fed's interest rate maneuvering and the housing market are connected, and mortgage rates often move in lockstep with the central bank's benchmark rate.
"The residential real estate market was frozen in November, resembling the sales activity seen during the COVID-19 economic lockdowns in 2020," NAR chief economist Lawrence Yun said. "The principal factor was the rapid increase in mortgage rates, which hurt housing affordability and reduced incentives for homeowners to list their homes."
Earlier this year, mortgages climbed above 7%, and are currently hovering around 6.52%. This means new home buyers must dig deeper than they have in recent years to afford monthly payments.
Brian Jacobsen, a senior strategist for Allspring Global Investments, pointed to a triumvirate of headwinds weighing on the housing sector: labor shortages, rising costs, and soaring mortgages.
Each piece of this "triple whammy," he said, has weighed on demand.
Lumber prices, too, this week hit a new low for the year. The key building commodity has fallen almost 70% this year, as it's uniquely tied to how consumers are feeling about housing.
And speaking of feelings: Homebuilder sentiment dropped for a 12th straight month in December to its lowest mark since 2012, excluding pandemic months in 2020.
All this in mind, there's still little certainty for what comes next. The most recent inflation reading showed the Consumer Price Index clocking in above 7%, still well above the Fed's 2% target.
That means more rate hikes are effectively guaranteed, which raises the odds of a recession and can further squash housing demand.
Remember that more rate hikes mean people are borrowing less and saving more.
In other words, if borrowing costs are set to get more expensive before they get cheaper, the year-ahead housing outlook may be bleak.
What's your forecast for the housing market next year? Tweet me (@philrosenn) or email me (prosen@insider.com) to let me know.
In other news:
2. US stock futures are wavering early Thursday, struggling for direction after a day of gains put down to an influx of bargain hunters in an oversold market. Meanwhile, the "Big Five" tech stocks have shed just under $3.7 trillion in market value this year so far. Here are the latest market moves.
3. Earnings on deck: Paychex, Apogee enterprises, and more, all reporting.
4. A strategist for $3.2 trillion State Street broke down how to drive returns in 2023. Even as the economy falters and enters a recession, Michael Arone said the market could recover relatively quickly. See the firm's three-part strategy for investing in next year's landscape.
5. The ruble dropped to a seven-month low against the dollar. Russia's currency has come under pressure from sanctions and trade restrictions, and the dip signals that those restrictions are beginning to weigh on Moscow's energy exports.
6. The S&P 500 rarely posts back-to-back losing years, but when it does happen, the second year is always more painful. Losses could be massive for stocks in 2023 if the key index doesn't rebound from its roughly 20% decline this year. Historically, the S&P 500 has only seen consecutive down years on four occasions.
7. Oil could surge nearly 50% when China puts an end to its zero-COVID policy. That's according to Dan Yergin, the vice chairman of S&P Global. The energy expert sees a base case for Brent oil to trade at $90 a barrel in the new year — but several factors could swing that price.
8. A top 1% fund manager explained why the S&P 500 is set to drop another 30% in the coming 3-to-9 months. James Abate has beaten just about all his competitors this year — and these are his favorite 11 stocks to buy right now.
9. This couple reached financial freedom from their real estate portfolio. They explained how they bought their first house for less than $2,000 — and the strategies they used to scale up to five properties that bring in $30,000 a month in revenue.
10. Nike soared as much as 14% Wednesday following its upbeat earnings report. The retail giant said it's getting an inventory bloat back under control. Get the full details.
Curated by Phil Rosen in Los Angeles. Feedback or tips? Tweet @philrosenn or email prosen@insider.com
Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.