Food, clothing and shelter. The necessities of life.
Households are becoming increasingly burdened by shelter costs.
Hitting Home: Housing Affordability in the U.S.
By Karan Bhasin, Prakash Loungani and Aziz Sunderji, Econofact, ·March 14, 2024
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Housing affordability has worsened over the past two decades. Median house prices are now 6 times the median income, up from a range of between 4 and 5 two decades ago… The ratio of median rents to median income has also crept up over this period from 25 percent to 30 percent…
Households — renters in particular — are increasingly cost-burdened. Households are considered cost-burdened if they spend more than 30% of their income on rent, mortgage and other housing needs… [end quote]
The Case-Shiller U.S. National Home Price Index shows that today’s prices are far above the previous peak in 2006.
Since the Global Financial Crisis (GFC), private equity (PE) has significantly impacted the single-family housing market by
purchasing foreclosed homes in bulk to create a new single-family rental (SFR) industry, which has contributed to rising home prices and rents, and is a leading factor in a decline in homeownership for many.
During the pandemic housing boom, as interest rates were low and home prices and rents soared, PE investors intensified their purchasing, with their share of home purchases climbing from 18.5% to 26.8% between 2020 and early 2025.
Not only do PE purchases compete with buyers. Renters are also impacted. Studies found that institutional investors often raised rents at a 60% higher rate than average when acquiring a property and were more likely to file for evictions than smaller landlords, prioritizing returns over community stability.
Last Wednesday (1/7/2026) President Trump said in a Truth Social post that he will be “taking steps to ban institutional investors from buying more single-family homes.”
In his post, Trump said he would be calling on Congress to codify a ban on the practice, writing that “people live in homes, not corporations.” For a change, Trump is calling on Congress, not simply waving his executive magic wand and banning an entire economic sector overnight at his whim. Any time Congress is involved the matter takes a lot of time – if it goes anywhere at all. So this is probably political grandstanding.
Several knowledgeable METARs discussed this.
More direct is Trump’s directive to the mortgage GSEs.
Trump’s New Housing Strategy Is All About Boosting Buyers Now
Administration says more proposals are on the way, but it has yet to address the shortage at the root of the affordability crisis
By Will Parker, Rebecca Picciotto and Nicole Friedman, The Wall Street Journal, Jan. 11, 2026
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Trump kicked off his new housing agenda on Wednesday. He announced he would take steps to ban Wall Street firms from buying homes, to ease competition for first-time buyers.
A day later, the president said he would direct the government-backed mortgage-finance companies Fannie Mae and Freddie Mac to buy $200 billion in mortgage bonds, a move economists think could lead to lower mortgage rates. The average rate for a 30-year fixed mortgage fell Friday to the lowest level since 2023…
Even if Trump succeeds in bringing down mortgage rates and breathing new life into the moribund housing market, he might not get his desired outcome. If government policies overstimulate demand from buyers without increasing the supply of houses, they may push prices higher as more buyers compete for a limited number of homes…
Home buyers face other headwinds. Many buyers are grappling with higher costs for home insurance, property taxes and homeowner-association dues. Concerns about job security are also rising, making more people hesitant to buy… [end quote]
Obviously, the rising expenses impact landlords also and are passed along into rent.
The mortgage GSEs, Fannie Mae and Freddie Mac, require specific characteristics for a loan to be “conforming.” These loans must adhere to limits on loan amounts (e.g., $806,500 for most of the U.S. in 2025), credit scores (usually 620+), and debt-to-income ratios. That’s a subset of all mortgages but most likely to apply to first-time home buyers. The conforming 30 year mortgage rate peaked in October 2023 and has gradually dropped since then. It’s still double the 2021 rate.
The slow-moving demographic wave of baby boomers moving out of homes into retirement homes (or death) will take decades to play out. Meanwhile, there is a shortage of homes. Increasing demand without increasing supply will drive prices higher. Restricting institutional buyers would reduce demand but that will take time – if it ever happens at all. Like all laws from Congress it would probably be a minestrone soup of complex exclusions, tax breaks, etc. I’m not holding my breath for tangible benefits to young families.
Stock indexes continued their rising trends. The percent of S&P 100 stocks above their 200 day moving average is 76% which is the top of its post-pandemic range. The Cyclically Adjusted P/E Ratio (CAPE Ratio) is over 40 compared with a historic median of 16.
Margin debt has reached a record of over $1.2 Trillion and is rising rapidly. This tsunami of debt is driving the asset prices higher but increasing risk.
Banks have essentially ZERO cash on hand. The system has no liquidity, no wiggle room. The Federal Reserve injected some liquidity (i.e. they bought some Treasuries from the banks, paying with fiat cash) around New Year’s Day but they haven’t continued that QE. I’m sure that they are watching the situation carefully because they want to step in immediately should a crisis situation arise. Personally, I would never allow my cash to drop to zero…and I’m not a bank.
The trade is risk-on as the SPX and junk bonds are rising faster than the 10 year Treasury price. The Fear & Greed Index is neutral.
Treasury prices have stabilized. The important 10 year Treasury yield declined after the Federal Reserve began to cut the fed funds rate in late 2024 but it rose after the December 2025 cut. The yield curve is steepening. Bond investors are aware of the growing federal deficits and the wave of new bond issuance that Treasury will need.
Gold, silver and copper are all in strong rising trends with a little noise. USD bounced off the bottom of its channel and is rising again. Bitcoin is still crawling along the bottom. Oil is stable in its channel. Natgas hit a high in early December and is now falling.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2025 was 5.1 percent on January 9. That is extraordinarily high and far above the Blue Chip Consensus of 1%.
Total Nonfarm Hires have been falling slowly but steadily since the 2022 peak. This is especially clear in Private Nonfarm Hires. But the Employment-Population Ratio - 25-54 Yrs. is still strong and not showing a recessionary drop. Job quality is improving.
The Purchasing Managers Index for Manufacturing fell again in December 2025 showing shrinkage in the manufacturing sector.
In December, the Services PMI® registered a reading of 54.4 percent, 1.8 percentage points higher than the November figure of 52.6 percent and a third consecutive month of expansion. Services represent 80% of the U.S. economy. The Prices index has exceeded 60 percent for 13 straight months. Inflation in services has been higher than goods inflation for many years. The CPI focuses on goods and dramatically understates services inflation which impact households directly (medical care, education, insurance, entertainment, etc.)
The Cleveland Fed’s Inflation Nowcast shows declining inflation but they predict a rise in 1Q26.
The METAR for next week is sunny.
Wendy