Markets “In a Nutshell” for September 20, 2021
Investment Week at a Glance
Stocks finished down for the week. The Dow Jones Industrial Average fell 0.10%, the S&P 500 was down 0.60%, and the NASDAQ fell 0.50%. Foreign stocks (MSCI EAFE) were also down, rising 0.60%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 1.37%. (Data source: Wall Street Journal)
Last week the latest CPI report was released which showed inflation was still high but is starting to come down to lower levels. Core CPI has fallen to 4.0% compared to the 4.5% number we saw in June. Many of the areas we saw inflation run high recently have slowed down as some prices have started to decline. Hotel rooms, airfare, and rental car prices all declined compared to last month which is most likely due to the Delta variant causing people to travel less. Used car prices also declined which may indicate the supply shortages of new cars are starting to ease. This CPI number backs the Fed’s view that the inflation we saw earlier is indeed transitory and will continue to decline. It is expected however that inflation will continue at higher levels than we have seen in the past decade, at least for the near future. From the market’s view, these numbers are a welcome sign that inflation will slow down and may not be as big of an issue as some thought earlier this year.
Over the last year, housing prices in the United States have risen nearly 20% and demand is continuing to be strong. The Pandemic caused people to want to move into more suburban areas and also caused home building to slow due to supply chain constraints and labor shortages. The current number of homes for sale in the United States is 46% less than the average over the last 20 years. Another factor in the housing shortage is the surge in lumber prices. At one point lumber was almost up 400% year over year but has recently come back down to lower levels as prices have fallen 60%. With the economy bouncing back and supply chain constraints work themselves out it is expected that housing prices will cool off. As home sales increase however this should help contribute to the expanding economy as people see their homes rise in value and decide to cash in.
According to Freddie Mac what is the current single-family home shortage in the Unites States? (Scroll Down for Answer)
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1. 3.8 million, in 2018 the shortage was 2.5 million but the Pandemic has caused the sharp increase and rise in housing prices.