What a Housing Crisis in 2023 Would Mean for This Corner of the Market

[Inside Wall Street with Nomi Prins]( Welcome to Inside Wall Street with Nomi Prins! It’s the only daily newsletter featuring the insights of renowned author and former Wall Street insider, Nomi Prins. Every day, Nomi shines a light on a massive wealth transfer she calls The Great Distortion. That’s the true cause of the permanent disconnect she sees between the markets and the real economy. And she shares ways you can come out ahead, if you know where the money is flowing. You’ll find all Nomi’s Inside Wall Street issues [here](. If you have questions or comments, send Nomi a note anytime [here]( or at feedback@rogueeconomics.com. What a Housing Crisis in 2023 Would Mean for This Corner of the Market By Nomi Prins, Editor, Inside Wall Street with Nomi Prins Welcome to our Friday mailbag edition! Every week, we receive fantastic questions from your fellow readers. And every Friday, I answer as many as I can. Up first today, a question from reader Chris on the housing crisis I touched on [last month]( With the housing crisis coming, does that mean selling stocks that deal with apartment rentals, not real estate you own or have a mortgage on? Because of course, someone has to buy the apartment complexes and the land and all that. – Chris M. Hi Chris, that’s an excellent question, and one that we didn’t cover during my recent presentation. Now, I can’t give personalized advice. Only you know what’s best for your situation. But what I can say is that I’m not necessarily bearish on apartment-related companies. Here’s why… Since the pandemic, home prices and rents have both gone up a lot. But rent as a part of people’s incomes has gone up the fastest. On average, house prices in the U.S. rose 12.4% from 2021 to 2022, according to the Federal Housing Finance Agency. [Featured: Bear Market Expert Reveals His #1 Stock for 2023]( Meanwhile, rents in the average metro area went up 15%, according to a report from the Urban Institute. Hourly wages rose only about 5% over the same period. As a result, landlords or owners of rental complexes have been able to keep profiting. How so? First, there was demand from renters who already couldn’t afford to buy homes – even when rates were lower. And now, it’s because renters who might have been saving to buy a home have to keep renting. In October, the average long-term mortgage rate in the U.S. hit 7% for the first time in over two decades. That means that, for many would-be homebuyers, the monthly payments would be too high right now. We can thank the Federal Reserve – and its aggressive interest rate hikes last year – for that. Either way, the big landlords win. As The New York Times reported in September: Publicly traded owners of sprawling real estate portfolios, like Invitation Homes, have enjoyed some of their best returns over the past few quarters… Mid-America Apartment Communities, a publicly traded owner of 101,000 units concentrated in Georgia, Texas, Florida and North Carolina, has benefited from all these trends… In the first half of the year, its new and renewed leases increased 17.1 percent over their previous rates, driving the largest increase in its dividend per share in decades. That’s why I’m not necessarily betting against apartment-related companies. Recommended Link [The One Ticker Retirement Plan]( Over the Shoulder Demo Now Available [image]( Market Wizard Larry Benedict crushed the market in 2022. But he didn't do it with a “traditional” method… For a limited time, he’s sharing a free over-the-shoulder “demo” of his strategy in action. It takes less than 10 seconds… [Watch it here.]( -- Next, reader Gordian B. wants to know what’s next in the Fed’s War on Inflation… Will QT continue? What will that do to the 10-year and 30-year bonds? If the Fed pivots and starts cutting rates will QT continue? Your thoughts, please! I am very confused! – Gordian B. Hi Gordian, thank you for writing in. You are not the only one confused about why the Fed does what it does – believe me! As for your question about QT (quantitative tightening), here’s what the Fed is doing… It’s slowly letting bonds “roll off” its book, but at a very slow pace. This just means they aren’t actively buying new bonds to replace them. According to the most recent reports, the Fed still has about $8.5 trillion of assets on its books. That’s down from a peak of $8.9 trillion at the height of the pandemic. I think of this as “QT-lite.” I say “lite” since it’s not actively selling 10-year, 30-year, or any bonds. It’s letting bonds just roll off as they mature. How long will that last? That comes down to [what I call the three stages of the Fed’s pivot](. [Featured: Nomi Prins: “What I said on Fox Business…”]( As a refresher, Stage 1 happened in December. That’s when the Fed raised rates by 0.50% – down from 0.75% at its last four meetings. I think the Fed will pivot to Stage 2 by mid-year. That means it will pause its rate hikes. But it’ll keep letting bonds roll off at this glacial pace until it reaches Stage 3 sometime early next year. Stage 3 will be rate cuts. Once the Fed enters or gets close to Stage 3, I believe that long-bond prices will rally and yields will drop. I hope that helps clear some of the confusion. Finally, our last question this week is a popular request I get here at Inside Wall Street. As regular readers know, I recently sat down with geopolitical strategist Peter Zeihan for a series of quarterly interviews. We’ve had two illuminating conversations already, with two more to come (find out how to get full access [right here](. And I often get questions from your fellow readers to ask Peter at my next sit-down. Recommended Link [World-Renowned PhD and her team reveal nationwide gas station epidemic]( [image]( 500,000 stations across America could soon have no more gasoline. Ever. [Click here to see why.]( -- This week, reader Alan M. wants to know more about a theme Peter covers a lot in his books and podcasts – the world’s serious population problem… I have a question for Peter for your next interview. What, if any, effect could immigration have on the demographic consequences of industrialization? I see lots of subtopics here regarding political will, bigger picture thinking, regional partnerships, etc. – Alan M. Hi Alan, thanks so much for that suggestion. It’s a topic we touched on briefly in the first interview. Here’s what Peter told me about the problem we’re facing… Most of the world ran out of children 40 years ago. We’re now running out of adults. So we’re looking at a systemic breakdown on two fronts: Demographically, there aren’t enough people to consume or produce. And geopolitically, the Americans are leaving the party. And the security that has overwritten everything about globalization is now over. Either one of these is a deal killer. And they’re both happening at the same time – this decade, right now. Our full conversation lasted about 45 minutes. As an Inside Wall Street reader, you can catch a 7-minute snippet of it [here](. But it’s certainly worth digging into further! I’ll add it to my list of questions to ask Peter when I sit down with him again. Recommended Link [Master Trader Reveals his One Stock Retirement Plan Stock Pick]( [image]( Hi. Jeff Clark here. I am going to reveal the one stock I use in my One Stock Retirement strategy that enabled me to achieve financial freedom early, at the age of 42. I’ve used it to profit during any kind of market condition, including complete market meltdowns. And you can get started with as little as $100. [Watch my video here.]( -- And that’s all for this week’s mailbag. Thanks to everyone who wrote in! If I didn’t get to your question this week, look out for my response in a future Friday mailbag edition. I do my best to respond to as many of your questions and comments as I can. Just remember, I can’t give personal investment advice. And if there are any other topics you’d like me to write about, I’d love to hear from you. You can write me at feedback@rogueeconomics.com. Happy investing… and have a fantastic weekend! Regards, [signature] Nomi Prins Editor, Inside Wall Street with Nomi Prins --------------------------------------------------------------- Like what you’re reading? 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