Wednesday's Scoop: Steady☀️

Hey friend - hope you’re having a great Wednesday.

Here’s what you need to know today to inform your work, spending, and investments:

1. Holiday spending is projected to break records this year.

2. Borrowers are trading for cheaper payments as interest rates fall.

3. Real estate sales continue to slow.

Inflation Rate: +2.5% (YoY), +0.2% (MoM)
^{Policymakers aim for 2% YoY inflation. (August CPI)}

Holiday shopping is expected to break records this year. According to Adobe Analytics, spending in November and December is expected to reach $241B. Unfortunately, much of that spending is expected to be paid for with debt. Use of buy now, pay later (BNPL) services is surging. Holiday shoppers are expected to spend a record $18.5 billion using BNPL services this year, up 11.4% from last year. With more Americans carrying debt, BNPL is becoming a popular option to stretch out payments, particularly for electronics and beauty products. Shoppers should be wary of using credit cards to cover BNPL installments, which could create a cycle of compounding debt. The best way to limit credit card debt over the holidays is to plan ahead and start saving cash today.

30yr Mortgage Rate: 6.1%
^{That’s down from 7.4% a year ago. (MBA)}
Median Home Price: $416,700
^{That’s up from $404K a year ago. (Existing Homes, NAR)}

People are taking advantage of lower mortgage rates to lower their monthly payments. Mortgage refinance applications surged by 20% last week, driven by a steady decline in mortgage rates to two-year lows. According to the Mortgage Bankers Association, the average interest rate for 30-year fixed-rate mortgages fell to 6.13%, down from 6.15% the previous week. Despite this boost in refinancing, home purchase applications rose by just 1% as buyers continue to face high prices and limited supply in the market. Lower mortgage rates aren’t enough to solve the affordability challenges.

Real estate sales keep slowing. Sales of new homes in the US fell by 4.7% in August, but the decline was less than expected, indicating potential for a rebound as mortgage rates and home prices decrease. According to the Commerce Department, the median price for new homes has dropped 4.6% from a year ago to $420,600, driven by a rising supply of newly built homes. With mortgage rates hitting a two-year low and a shortage of existing homes available, demand for new homes may pick up in the coming months, potentially boosting sales into 2025.

The Market: ⬇️ -0.2%
S&P 500: 5,722.26
1Mo: +2% | 1Yr: +32% | 5Yr: +93%

The market drifted lower on Wednesday after multiple days of new record highs. Investors feel confident that the economy is holding up well, inflation is under control, and borrowing costs will keep coming down.