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🪩 Takeaways from Jackson Hole | The Fed's Targets for '23 | OpEd - AirBNB Bubble

Author

Michael DiLucchio
August 28, 2023

Morning! This is MF Lending - the fool-proof way to serve up mortgage and real estate market knowledge without any of the guesswork. So you’ll look like the smartest agent in the room (and you are!)

Here’s what we’ve got for you today:

  1. Takeaways from J Pow’s Jackson Hole Speech 🏔️

  2. Former Fed Vice Chair Roger Ferguson on the Fed’s Targets 🎥

  3. Op-Ed: The AirBNB Bubble Will Pop The Housing Bubble 🫧

By the way, this article on Buyers Choosing Newer Homes is the most clicked link in this newsletter, you should check it out if you are interested.

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Takeaways from J Pow’s Jackson Hole Speech 🏔️

Live from a windowless room in the most beautiful place in the country, Jerome Powell gave a speech following the Jackson Hole Symposium discussing the economy and rate environment occuring across the US.

Here are a few highlights from the speech:

  • Jerome Powell on Friday said the central bank may need to lift interest rates further to finish the job.

  • Consumer spending continues to be “robust” - causing GDP growth to come in above expectations.

  • “Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy.” - Powell

  • "Although inflation has moved down from its peak - a welcome development - it remains too high. We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective."

    • Said another way - rates will be higher for longer - most likely into Q1/Q2 of ‘24

There’s no getting around it - these were extremely hawkish statements from the Fed President.

The expectation for the September 20th Fed meeting is still that the Fed will skip a rate hike (currently at 80% probability). But there could certainly be at least one more hike before the end of the year.

The reality is that we could see high 7% interest rates before the end of the year.

I think it is inevitable that this softens the housing market. Mortgage payments are simply too high for many consumers.

A possible canary in the coal mine is the upcoming CPI and Jobs reports in September. It is clear that the Fed is extremely data-dependent - so if these data points come in below expectations, we would see a visceral reaction from bond traders.

Live look at me and JPow on Friday:

Former Fed Vice Chair Roger Ferguson on the Fed’s Targets 🎥

Roger Ferguson discusses the key takeaways from the Fed's annual symposium in Jackson Hole.

Op-Ed: The AirBNB Bubble Popping Will Pop The Housing Bubble 🫧

I came across this article by Charles Hughes Smith over the weekend and thought the analysis is fascinating.

A summary of his analysis and opinion:

This is how bubbles collapse: the "vital few" 4% sell at whatever the market will bear, pushing prices down, and the 64% awaken to the rapidly narrowing window for locking in bubble capital gains.

This rush for the exits triggers a strike in buyers, who realize there is no way to know how low valuations will fall, and so waiting for a bottom makes much more sense than playing "catch the knife," i.e. buying as a bubble deflates, hoping you don't get burned by prices falling after overpaying.

Charles Hughes Smith - via ZeroHedge

Absolutely worth the read for those clients in the space or looking to invest in the future. 😎

By the way…what do you think of our new logo?

The Cul-de-Sac

Thanks for reading - that is all we have for today 😎

Please forward this to your friends and colleagues if you found it valuable.

— Michael F DiLucchio

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