One Reason Why Real Estate Prices Aren't Falling

Hooray, inflation!... Revisiting the 'cost of borrowing'... What's happening in real estate... A real estate slowdown is not imminent... 'Only Washington could lose money making money'...  'It's a celebration,' the financial-news anchor said today... The U.S. stock market expressed joy, with the U.S. benchmark S&P 500 Index up nearly 1% to a new 16-month high […] [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] Hooray, inflation!... Revisiting the 'cost of borrowing'... What's happening in real estate... A real estate slowdown is not imminent... 'Only Washington could lose money making money'... --------------------------------------------------------------- 'It's a celebration,' the financial-news anchor said today... The U.S. stock market expressed joy, with the U.S. benchmark S&P 500 Index up nearly 1% to a new 16-month high as "investors celebrated the latest inflation report," the guy with the deep voice said on the radio around lunchtime. I (Corey McLaughlin) said to take note of the newest consumer price index ("CPI") report this week. The U.S. Bureau of Labor Statistics published it this morning, and it showed a 3% annual gain compared to last June. Overall, the market took this as superb news... That's because it was a significant slowdown from the 4% CPI of May... It marked the smallest year-over-year increase in inflation since March 2021... And the data showed a mere 0.2% month-over-month gain in goods and services, which was below Wall Street analyst expectations. Forget the fact that core CPI – which doesn't include food and energy – is still up 4.8% from a year ago... And ignore the idea that the Federal Reserve primarily looks at a different inflation metric – the core personal consumption expenditures index – which at last check is at 4.6%. Stock prices still jumped today, on balance... The small-cap Russell 2000 Index finished 1% higher, the tech-heavy Nasdaq Composite Index was up 1.2%, and the Dow Jones Industrial Average was up 0.3%. And, in the spirit of [our discussion yesterday]( we'll note that the S&P 500 Equal Weight Index finished 0.5% higher, too. Speaking of all of this bullishness... Your notes keep coming in about our observations of "unpopular bullish" action in U.S. stocks lately. Please keep them coming... Here is one from subscriber Michael U. raising a good point that, as you'll see, brings us to an analysis of inflationary themes in the real estate market... In the July 10 article by Corey McLaughlin he says '... the cost of borrowing money has gotten more expensive...' and glosses over that fact as if it doesn't really matter. To me, raising interest rates is the worst kind of inflation, especially for an economy like the American economy that runs on credit. It is the equivalent of throwing gasoline on a burning fire and lying to the public that it will put the fire out. The Federal Government has caused the inflation we are currently experiencing through their massive unproductive spending programs. Then another arm of the same evil empire b.s.-es the public that they have to fight inflation and have to increase interest rates to do it even if it means driving the economy into a depression as bad or worse than the one in the 1930s. Raising interest rates raises prices on everything else as it ripples through the economy. They are fighting inflation with inflation-causing tools! Does this make sense to anybody? First, Michael, thanks for the note. I actually agree 100% with you. What's happening in stocks doesn't necessarily align with the trash situation of the debt-ridden economy. And it probably only sounded like I glossed over the fact of "more expensive" money because I feel like we've talked about it so much in other essays. It does matter. But the pace of expected rate hikes ahead doesn't appear to matter much to stock investors today. As we cited via our colleague and Ten Stock Trader editor Greg Diamond the other day, [investors seem to be over the "shock" of rates going higher](... mainly because the "official" inflation numbers keep going down. That would suggest a slower pace of inflation ahead and that lending rates won't get much higher... which the stock market likes. As Greg put it [today to subscribers](... Low inflation is good for the market. Of course, though, what Mr. Market thinks may not reflect the reality that people on Main Street are experiencing... such as unaffordable housing today and rising debts. Herein lies our daily challenge/duty of pointing out the problems and risks in the economy and markets while acknowledging the bullish action in stock prices and ways to make money, too. What's happening in residential real estate... Here's an example illustrating why the cost of borrowing is important and, as you suggest, may not have as great of an impact on inflation as many might hope... In this higher-rate environment, the average 30-year fixed mortgage rate is around 7%. So all those people paying 3% or 4% – including those who refinanced during the pandemic thanks to the stimulative Federal Reserve – suddenly have more incentive to keep their existing houses and loans. So with high mortgage rates discouraging prospective sellers from moving, yet still enough demand from buyers who may want a new home or anyone looking to move, the limited supply means higher prices... and higher associated costs when you factor in mortgage rates. That's not exactly a recipe for lowering prices or slowing inflation in residential real estate, at least, which is a huge part of the economy. Things may be different depending on where you live, but on average, home prices are up again this year – roughly 4% from February to April, according to the latest data from research firm CoreLogic. That growth is typically what you might see over an entire year. In fact, the firm forecasts a 4.5% rise in home prices from last month through May 2024. You would think real estate would be one of the hardest hit parts of the economy when interest rates rise – given all of the debt instruments involved in financing purchases and loans – but no dice. Note: This conversation pertains to residential real estate, not commercial properties, which have their own set of challenges with "work at home" life sticking around in various ways. This is one big reason why housing prices aren't falling... Turns out, again, rock-bottom interest rates and stimulus have their long-lasting effects. Our colleague Chris Igou just so happened to write about this idea [in today's Stansberry NewsWire morning briefing](. As Chris noted... Today, 89% of mortgage loans are fixed rate. And 62% of U.S. mortgage holders are sitting on an interest rate below 4%. That means the majority of homeowners don't have to worry about rising mortgage payments thanks to higher interest rates. There isn't going to be a wave of folks having to sell because they suddenly owe more than before. With no homeowners rushing to sell, the housing market is gridlocked. Fewer folks are buying homes. But housing supply remains tight. And that keeps prices high. This is exactly why, conversely to what you might imagine would be necessary to slow inflation, a rise in home prices can continue from today... You're not hearing this from anyone suggesting that high inflation is a goner based on today's CPI numbers... A residential real estate slowdown is not imminent... Here are some actual numbers to support the idea of higher residential real estate prices ahead, not lower, given the supply-demand dynamics. As Chris shared... The U.S. Existing Home Sales Months' Supply shows it. This index measures how many months it would take to sell the existing supply of houses on the market. The average of the past 20 years is more than five months. Today, the supply sits at just three months. That's well below the long-term average... This is one reason why home prices in the U.S. are climbing. There aren't many houses to choose from. Take a closer look at that chart. Supply is below pre-pandemic levels... If anything, we may be setting up for a mini-boom in residential real estate even after home prices, on average nationally, are up 40% from before the pandemic. That's when, of course, the Fed cut bank lending rates to zero and held them there for way too long, which is what got us into the current inflation situation in the first place. (Well, it was that and the decades of fiat-currency manipulation that came before.) Here's maybe the most disheartening example of government financial mismanagement ever... I happened to come across this final note today while reading a separate story about a guy in Kentucky who found more than 700 Civil War-era coins – now worth millions of U.S. dollars – buried on his farm. Did you know it costs the U.S. government more than 5 cents to produce a nickel? In fact, it costs about 10 cents, according to the U.S. Mint. If that's not a sign of really sticky inflation, and maybe the most disheartening and sadly comical example we've ever heard, I'm not sure what is. In April, a few people in Congress actually introduced new legislation to lower the costs of making nickels after learning of the latest data from the Mint. They suggested lowering the amount of nickel in a nickel (can't make this stuff up) and using more copper. Senator Joni Ernst of Iowa said in a statement about the proposed bill, which has been stalled in Congress since 2020, that the government could save as much as $51 million if the changes were made. Ernst's statement reads... It's absolute non-cents that American taxpayers spend ten cents to make just one nickel. Only Washington could lose money making money. Evidently, the U.S. Treasury Department has been losing money on making nickels and pennies (which cost 2.7 cents to make) since 2006. Same goes for most if not all of the Treasury's other business, too, it seems. Those guys would be better off finding coins in the dirt. A Stark Warning About the Fed In part two of an interview with our editor-at-large Daniela Cambone, financial strategist Greg Mannarino stresses that people should remain skeptical of what the Federal Reserve is telling them because "the polar opposite is true." [Click here]( to watch this video right now. For more free video content, [subscribe to our Stansberry Research YouTube channel](... and don't forget to follow us on [Facebook]( [Instagram]( [LinkedIn]( and [Twitter](. --------------------------------------------------------------- Recommended Links: [The 2023 AI Race: Will You Be Left Behind?]( On Wednesday, July 19, two Wall Street legends are joining forces for the first time ever... to reveal how artificial intelligence has just shattered one of the most important barriers in technological history. Together, they'll show you all the details behind this momentous breakthrough... and exactly why the opportunity to use AI in 2023 could transform your wealth – or leave you behind forever. This critical update is 100% free – [click here for details](. --------------------------------------------------------------- [Here's What You Missed This Week]( It was a stunning discovery... One subscriber has cost Stansberry Research more than $10 MILLION over the past four years – money he legally "redirected" from our potential coffers... right to yours. When we found out, we invited him to our Baltimore office to explain. Find out what happened... and how it affects YOU now in a big way [right here](. --------------------------------------------------------------- New 52-week highs (as of 7/11/23): Adobe (ADBE), A.O. Smith (AOS), Activision Blizzard (ATVI), Booz Allen Hamilton (BAH), Berkshire Hathaway (BRK-B), Brown & Brown (BRO), Commvault Systems (CVLT), DraftKings (DKNG), Electronic Arts (EA), Expeditors International of Washington (EXPD), Floor & Decor (FND), Gambling.com (GAMB), Global X MSCI Greece Fund (GREK), Intercontinental Exchange (ICE), iShares Convertible Bond Fund (ICVT), Ingersoll Rand (IR), iShares U.S. Aerospace & Defense Fund (ITA), JPMorgan Chase (JPM), Meta Platforms (META), MYR Group (MYRG), New York Community Bancorp (NYCB), O'Reilly Automotive (ORLY), Parker-Hannifin (PH), Pure Storage (PSTG), Rollins (ROL), Sprouts Farmers Market (SFM), SPDR Portfolio S&P 500 Value Fund (SPYV), The Trade Desk (TTD), Visa (V), and VMware (VMW). In today's mailbag, some more feedback on our essays the past two days ([here]( and [here]( where we talked about bullish trends in stocks... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "Well, I subscribed to Ten Stock Trader and Greg has been predicting a bullish market for some months now, while many others at Stansberry supported the bearish stance. So, I am bullish, because Greg is the best practitioner I can find of W.D. Gann (best market trader in history) and Elliott Wave technical indicators that I have found. "If one does not believe that W.D. Gann and other technical indicators with massive decades-long records for being correct, then as we say in the south 'There is no cure for stupid.'" – Subscriber George O. "I agree, with the exception of a few minor pullbacks, we are still in a bullish uptrend." – Subscriber Tom M. All the best, Corey McLaughlin Baltimore, Maryland July 12, 2023 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios Stock Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 1,208.5% Retirement Millionaire Doc MSFT Microsoft 02/10/12 1,042.9% Stansberry's Investment Advisory Porter ADP Automatic Data 10/09/08 815.2% Extreme Value Ferris wstETH Wrapped Staked Ethereum 02/21/20 634.1% Stansberry Innovations Report Wade HSY Hershey 12/07/07 583.4% Stansberry's Investment Advisory Porter WRB W.R. Berkley 03/16/12 527.6% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 508.8% Retirement Millionaire Doc AFG American Financial 10/12/12 402.6% Stansberry's Investment Advisory Porter TTD The Trade Desk 10/17/19 337.3% Stansberry Innovations Report Engel FSMEX Fidelity Sel Med 09/03/08 316.5% Retirement Millionaire Doc Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 4 Stansberry's Investment Advisory Porter 3 Retirement Millionaire Doc 2 Stansberry Innovations Report Engel/Wade 1 Extreme Value Ferris --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Stock Buy Date Return Publication Analyst wstETH Wrapped Staked Ethereum 12/07/18 1,500.1% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,069.3% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,032.6% Crypto Capital Wade MATIC/USD Polygon 02/25/21 820.8% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 715.5% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Band Protocol crypto 0.32 years 1,169% Crypto Capital Wade Terra crypto 0.41 years 1,164% Crypto Capital Wade Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Frontier crypto 0.08 years 978% Crypto Capital Wade Binance Coin crypto 1.78 years 963% Crypto Capital Wade Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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