Wednesday's Scoop: Conflicted🌤️

Hey friend - here’s what you need to know today to inform your work, spending, and investments…

1. High prices have Americans hanging onto their cars longer than ever.

2. High home and mortgage costs continue to stall real estate sales.

3. Policymakers remain hesitant to reduce borrowing costs.

Inflation Rate: +3.4% (YoY), +0.3% (MoM)
^{Policymakers aim for 2% YoY inflation. (April CPI)}

High prices have Americans hanging onto their cars longer than ever. S&P Global reported that the average age of American vehicles on the road rose to a record high of 12.6 years in 2024, two months older than last year’s average. High sticker prices are the main culprit, but some people are also holding out for an electric vehicle. The average price of a new vehicle in America was just over $45,000 last month, well out of range for most Americans, especially with leasing interest rates at multi-decade highs.

Policymakers remain hesitant to reduce borrowing costs. Newly released minutes from the Federal Reserve’s last meeting revealed increased concerns from committee members about the cost of living continuing to rise faster than they would like. Inflation has remained above the Fed’s target pace for the past few months after declining in the back half of last year. During the meeting, there was little inclination to cut baseline interest rates, which currently sit at the highest level in over 20 years. Some members even considered raising the cost of borrowing to slow business activity further and prevent the economy from overheating. However, policymakers also mentioned heightened concerns about the state of the consumer. The financial health of the average American has started raising red flags, including greater dependence on credit cards and buy-no-pay-later schemes, and delinquent payments have escalated quickly. The shifting tone from the Fed has lowered economists’ expectations for interest rate cuts this year.

30yr Mortgage Rate: 7.0%
^{That’s up from 6.7% a year ago. (MBA)}
Median Home Price: $407,600
^{That’s up from $386K a year ago. (Existing homes - NAR)}

Low inventory, rising prices, and high mortgage costs are still stifling the housing market. According to the National Association of Realtors, the number of existing homes sold in the US declined for the third straight month last month. Home sales are down 1.9% from a year ago. Generationally high borrowing costs and a low supply of available homes are driving away buyers and prompting current homeowners to wait on selling. The available homes on the market are nearly half of what they were pre-pandemic. This has pushed home prices higher for the past four months. Most of the inventory growth has been for higher-end homes. Nearly a third of all sales were done in cash. The median existing home sold last month cost $407,600. Existing home sales make up most of the US housing market and are a crucial indicator of its overall health.

The Market: ⬇️ -0.3%
S&P 500: 5,307.01
1Mo: +6% | 1Yr: +27% | 5Yr: +88%

The market contracted from its record high on Wednesday as investors fretted over the Federal Reserve's last meeting minutes. Policymakers raised new concerns about the economy's health and the risk of rising living costs.