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Hey friend - have you noticed the stock market recovery, crypto comeback, low unemployment, and low inflation this month? Pretty neat.
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Here’s what you need to know today…
Big Picture
Falling mortgage rates have driven a massive pickup in home construction.
There is still a significant housing shortage.
Economic growth has been strong this quarter.
The Market: ⬆️+0.6%
S&P 500: 4,768.37
1Mo: +5% | 1Yr: +25% | 5Yr: +97%
The market continued rising today, flirting with a new record high. Investors feel good about low unemployment, falling borrowing costs, low inflation, and solid consumer spending.
Falling mortgage rates have injected enthusiasm into the housing market again. The Commerce Department reported a surprising surge in new home construction in November, with housing starts up 15% to the highest level in over a year. Homebuilder sentiment improved on optimism that rates will keep falling. Mortgages have gotten a little cheaper since October, but they’re still nearly double what they were a few years ago. According to the Mortgage Bankers Association, the average rate for a 30-year mortgage has fallen from almost 8% in October to around 7%.
🏠 Falling rates likely won’t be the thing that makes homes affordable again. Mortgage costs could continue to fall, but it would take an economic crisis for rates to go back to where they were a few years ago. Prices need to come down.
We’re still experiencing a housing shortage, particularly for affordable housing. The National Association of Realtors reported that the inventory of previously owned homes on the market is only half of what it was before the pandemic. This shortage has kept home prices from falling as demand dramatically exceeds supply. New construction is also not evenly distributed, causing isolated shortages. Most of the new construction is happening in the South.
The economy has been strong so far this quarter. The latest projection from the Atlanta Federal Reserve’s GDPNow estimates 2.7% annualized real GDP growth for the fourth quarter. [🤓] That would be a significant slowdown from last quarter’s 5.2% but still above the long-term trend. However, the range of growth forecasts from the biggest banks is much lower. We won’t know the actual numbers for a few weeks after the end of the year.
How are you feeling about the economy? |
Company Scoops 🗣️🌎💰
💡How are these companies doing? Judge their decisions. Investing starts with an opinion.
 Target | False Narratives Target may have used claims of rising theft and violence as an excuse to close nine underperforming stores this year and potentially to promote tougher crime laws. An investigation found higher crime rates at nearby stores Target kept open. |
 Comcast | Massive Hack Comcast revealed a cybersecurity breach affecting large companies and nearly all of its Xfinity customers in which hackers may have accessed personal information like partial social security numbers. Comcast has known about the breach since October. |
 Alphabet | Wrist Slaps Google has had mixed success battling against claims that it has a monopoly on Android apps and unfairly charges a 30% commission on all transactions. The tech giant settled a lawsuit from 50 states for $700M but just lost another big trial. |
 Tesla | Pay Appeal Tesla will raise wages for workers at its Nevada factory by at least 10% after worker unions earned better contracts at competitor automakers and announced plans to unionize Tesla. Autoworkers at Tesla's European locations have started striking. |
 ExxonMobil | Electric Capture Exxon is testing new carbon capture tech that creates electricity through a chemical reaction with the refinery's methane emissions before storing the carbon under water. The process creates power instead of consuming it, lowering costs. |
(These links only work for 24 hours while the story is live.)
Inside Scoop 🤓
What exactly is GDP, and why should I care?
Gross Domestic Product (GDP) is how we track how much stuff the economy is producing. The actual number (~$28 trillion) doesn't matter as much as the direction and magnitude. We track the growth rate of real GDP (inflation-adjusted) to know whether the economy is expanding or contracting from the previous quarter.
The reporting style can be a bit confusing. The main number you hear will be an annualized growth rate (+5.2%), representing how much the GDP would increase/decrease if the economy hypothetically grew at that rate for an entire year. It's different from how much our production increased/decreased quarter-to-quarter (+1.3%) and not representative of the growth/decline over the past year (+3.0%). Annualizing the past quarter’s change makes the backward-looking number a little more forward-looking.
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