🤔 How Many Gen Z's Own a House?

Only 3% of homebuyers in 2024 so far have been Gen Zers April 12, 2024 | Peel #687 In this issue of the Peel: - 📈 Wholesale prices rose 0.2% monthly and 2.1% YoY in March. - 🍎 Bank of America reiterated their buy call on Apple… what do you think? - 🏡 Only 3% of homebuyers in 2024 so far have been Gen Zers. Market Snapshot 📸 Banana Bits 🍌 - JOIN OUR [DISCORD SERVER](=)—We just launched the WSO Discord for Peel and Alpha subscribers (a.k.a., our wisest apes), so get on there to finally be able to tell me how wrong I am. [LFG!!!]() - U.S. M&A activity fell 22.8% in March, clearly explaining why we [didn’t get the offer at Evercore]() - The cost of not being homeless just hit another [all-time high]( - California says Elon’s Robotaxi plans may be [hitting a yellow light]( - Wage growth is indeed back to pre-pandemic [growth trends]() Smart Resumes, Smarter Careers = Elevate your first impression in the finance world with WSO Academy's smart resume services. Harness the power of AI to craft resumes that don't just list your experiences but highlight your potential. Our AI-driven approach analyzes and optimizes every detail, ensuring your resume speaks directly to finance industry leaders. Combine this with our AI-enhanced LinkedIn profile reviews, and you're set for a smarter, more strategic career path. Step into the era of intelligent career tools with WSO Academy. [Click here to join the WSO Academy Waitlist. Limited slots only.](=) Macro Monkey Says 🐒 Back to Boring $100 says Jake Paul doesn’t make it to Round 2 in his upcoming fight against Mike Tyson. You know what, let’s put $1mn on him not making it to Punch #2… But, fortunately for him, he—along with everyone else awake today—did make it to Round 2 of this week’s inflation reports. That’s because yesterday, we got our second check-in on inflation for the week in the form of the Producer Price Index (PPI), an inflation report that, unlike the CPI, can actually give us some insight into underlying inflation. Now that we have a March inflation report that actually holds some value let’s get into it. The Numbers Wholesale prices increased 0.2% monthly and 2.1% for the year in March, lower than the 0.3% expected. [Source]() But don’t get too excited yet. We might’ve undershot expectations (just like every single one of my transcripts) on the monthly side, but this report also gave us the highest annual reading since April of 2023. And just like Tuesday’s CPI print, it doesn’t get much better on the Core metric. Core PPI strips out trade services along with food and energy costs, and in March, this reading increased by 2.8%. Monthly Core PPI was right in line with the headline numbers, however, gaining just 0.2% and reflective of a 1.6% decline in wholesale energy costs compared to March 2023. [Source]( Markets barely reacted to this release, also very unlike the reaction a day prior caused by the CPI release There are a few reasons as to why the market took this inflation report in stride compared to the hissy fit thrown on Wednesday. Most of all, these come down to: - The headline number, - Predictive power, and - Goods vs Services For starters, any inflation reading with a 2 as the first number is usually a good thing—except if you’re just coming off of a period with 1 as the first number. The fact that the headline number is almost right at the Fed’s target of 2% is like a market melatonin. Secondly, the PPI index actually has some kind of forward-looking value. Since these are wholesale prices, the PPI is a leading indicator of consumer prices since those wholesale goods and services will eventually end up in the hands of consumers. So, seeing the PPI’s rate of change clock-in far lower than the CPI’s 3.5% on both the headline and Core reading, this gives markets a new, and now, better-than-expected view of future CPI reports. [Source](=) And lastly, as we can see above, services inflation was the primary driver of this PPI increase. On its face, that sounds bad given that ~68% of the U.S. economy and the PPI report’s weighting is attributable to this measure. But then we take a look deeper and realize that the largest driver of that increase in wholesale service inflation is actually our own fault. Securities brokerage, dealing, investment advice, and related services jumped 3.1%. That was by far the largest single-item contributor to services inflation in March. In addition to the three reasons laid out above, there was some actual good news in this report as well. The Sports Center Top 10 Plays of this PPI report would include: - Goods prices decreased by 0.1%, as opposed to February’s 1.2% monthly gain, - Declining energy costs (actual deflation) - Slowing growth in food and transportation costs (disinflation) The Takeaway? Pairing this release with yesterday’s other economic news du jour—continuing jobless claims—we can see that, overall, yesterday provided further evidence that JPow’s economic Ozempic has been working to heal the U.S. economy. [Source]( And sure, it was definitely JPow’s medicine meant to heal the economy during the pandemic that put us here in the first place, but gotta give credit where credit’s due. Chilling inflation out without riling up the labor market is like eating cake and candy every day to lose weight—but once again, Ozempic will save the day. Also, almost forgot, make sure to HMU if I have any takers on that Jake Paul bet above. I have a good feeling he’ll be one of those “continuing jobless claims” and be facing major ego deflation after this bout with Tyson… What's Ripe 🤩 Paramount Global (PARA) 📈7.3% - This week has been even more volatile for Paramount than Logan Roy’s blood pressure. It’s a tough call as to which succession has been more stressful. - And yesterday, Paramount shares caught a bid on reports that merger talks with Skydance had entered the “fast lane.” - Despite the anger among shareholders, this got new buyers excited, especially when paired with the new CEO’s plan for “massive cost cuts.” Apple (AAPL) 📈4.3% - Everyone always asks, “Are we at our peak Apple?” but nobody ever asks if Apple’s mental health is at its peak. BofA tried to help out on that front yesterday. - The bank issued a research note yesterday reiterating their bullishness and a $225 price target, arguing that the Street is underestimating the firm once again. - BofA sees another 180bps of gross margin expansion left on the table that hasn’t yet been priced in as the services segment scales more and more. What's Rotten 🤮 Carmax (KMX) 📉9.2% - Earnings szn is off to a depressing start this year as companies like Carmax have killed the vibe before the party even starts. They missed across the board. - The used car retailer attributes missing on sales, earnings, and guidance to affordability struggles in used cars and pull backs on big-ticket spending. - Carmax reported EPS of $0.32/sh on $5.62bn in sales, far below the $0.45/sh on $5.78bn expected. Fastenal (FAST) 📉6.5% - I thought this company sold Daily Peel readers at first as its products include “nuts” and “studs,” but it turns out it’s just one of my dad’s favorite companies. - The construction and industrial material supplier did not give us a hot start to earnings, slightly missing on both EPS and revenue. - Execs did the normal thing and blamed everything except themselves, like the economy and weather, citing “poor demand” as evidenced by weak PMIs. Thought Banana 🤔 Who Gon’ Run This House Tonight? Nope. I can assure you we are not going to run this house, town, and especially not the entire housing market tonight… or probably any night… for a damn long time. We talk a lot about the health (or, more accurately, lack thereof) of the housing market. Recently, we got data from the National Association of Realtors (NAR) on exactly who is running the housing market. To no surprise, Gen Z is the runt of the litter. This makes sense as the youngest generation has members who have graduated middle school, but data outside the NAR study hints at exactly why Gen Z (wannabe) homebuyers are so down bad. What’s Happening? [Source]() Per the NAR, only 3% of homebuyers in 2024 so far have been members of Gen Z, which the NAR considers anyone 25 years old and under. Personally, I’m offended at that age range as that puts me only a few weeks away from being considered a “millennial,” and that’s about as insulting as saying “never heard of it” when your friends say they got the offer from Goldman. Anyway, 3% isn’t an egregiously low portion of the homebuying market for Gen Z, especially considering most of us aspire to be YouTube and OnlyFans stars, but it is certainly lower than it has been historically. [Source]( Once again, this is further evidence of the affordability crisis going on in U.S. homes right now. Low inventory leading to high prices, even despite decade-long highs in mortgage rates, has baked us a nice cake of f*ck you. And we can’t really blame the older generations either. I mean, if I had a sub-4% mortgage rate, you’d have to pry that house out of my cold dead hands. And ironically, that might be the only way this affordability crisis ends. But before we call Grandma and beg her to sell her house, we have to start understanding another reason why home prices are so unaffordable for us poor losers born after 1998. [Source]() Certified smarty pants [Torsten Sløk](), Chief Economist at Apollo, points out in the above chart that we’ve hit a new record high in the portion of the housing market made up of new homes. Today, 1 in every 3 homes sold in the U.S. is “new” or has not had a previous homeowner. Historically, this reading tends to sit around 1 in every 5 or 6 homes sold but has exploded in recent years. This is both good and bad. It’s good in the sense that increasing new homes will 1) increase supply, helping pull down prices, and 2) new homes are generally much higher quality, earning a “no one else has sh*t here before” premium. But in the short-term, that mean a higher proportion of available homes will be sold at that premium, meaning that the selection of homes presented to buyers will carry a higher average price tag. [Source]( The Takeaway? Even with new supply coming online, Gen Z is still largely stuck between living with their parents and homelessness. And at this point, I don’t know what sounds worse. Any reduction in home prices triggered by new homes coming online will take a long time to filter through the market and actually pull down prices by putting supply more on par with demand. Effectively, we’re waiting for enough new homes to come online so that they can start to pull down the price of existing homes on the market, as that’s likely the sector of the market Gen Z will play in. Sadly, that might take a while… 💭 The Big Question 💭: When can we expect a reduction in home prices or mortgage rates to help with affordability? Is this demographic shift of homebuyers just a part of the societal trend of living longer? Should the government get involved? Banana Brain Teaser 💡 Previous 🗓 A certain store will order 25 crates of apples. The apples will be of three different varieties- McIntosh, Rome, and Winesap- and each crate will contain apples of only one variety. If the store is to order more crates of Winesap than crates of McIntosh and more crates of Winesap than crates of Rome, what is the least possible number of crates of Winesap that the store will order? Answer: 9 Today 🕐 A bicycle store purchased two bicycles, one for $250 and the other for $375, and sold both bicycles at a total gross profit of $250. If the store sold one of the bicycles for 450, what could be the store’s gross profit from the sale of the other bicycle? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “Don't take action with a trade until the market, itself, confirms your opinion. Being a little late in a trade is insurance that your opinion is correct.” — Jesse Livermore How Would You Rate Today's Peel? 😁[All the bananas](=) 😐[Meh]() 😩[Rotten AF]() Happy Investing, David, Vyom, Jasper & Patrick [ADVERTISE](=) // [WSO ALPHA]() // [ACADEMY]() // [COURSES]() // [LEGAL]() [Unsubscribe]( IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States (617) 337-3353