Confounded Interest – Anthony B. Sanders
Financial Markets And Real Estate
Global uncertainty hits an ALL-TIME HIGH.
Higher than Covid, the 2008 financial crisis, and the dot-com crash COMBINED.
You know what that means!
People are staying in their homes longer now than in 2006. 12 years now versus 6.5 years in 2006.
The average effective mortgage life is 5-7 years,
12 years in the same home makes housing policy more difficult to implement.
We are seeing the aftermath of the Federal government’s fiscal response to the Covid outbreak of 2020. Home prices exploded following The Federal government’s spending spree. The end result? US housing is simply unaffordable for millions of households.
Not really surprising given the soaring home prices following the Covid Federal spending spree.
The S&P Cotality Case-Shiller U.S. National Home Price NSA Index posted a 1.3% annual gain (YoY) for December 2025, down from a 1.4% rise in the previous month. Average hourly earnings now at 3.73% YoY, higher than home price growth.
Home price growth exploded following The Federal governments’ Covid-related spending splurge.
Geographic divergence widened sharply: Chicago and New York led all markets with gains above 5%, while Tampa, Phoenix, Dallas, and Miami posted the steepest declines among markets that finished the year in negative territory.
Inflation cooled significantly under Trump, but The Fed keeps printing M2!
Sure, Hillary, sure.
I called this inflation power!
Underlying U.S. inflation increased more than expected in December, and signs are pointing to a further acceleration in January, which would strengthen expectations that the Federal Reserve would not cut interest rates before June.
The personal consumption expenditures price index, excluding the volatile food and energy components, rose 0.4% after an unrevised 0.2% gain in November, the Commerce Department’s Bureau of Economic Analysis said on Friday. In the 12 months through December, core PCE inflation advanced 3.0% after increasing 2.8% in November.
The PCE price index increased 0.4% in December after rising 0.2% in November. PCE inflation increased 2.9% year-on-year after gaining 2.8% in November.
But in terms of contributions to the 0.4% figure is that durable goods rose 2.051%.
The Fed has been printing money (M2) like there is no tomorrow. With M2 growing at 4.6% YoY in December.
Rate-cut expectations have surged (dovishly) higher this week (along with tumbling Treasury yields) amid a mixed macro picture (Labor market ‘good’, Retail sales bad, Housing ugly).
Today could change all that as CPI for January prints with risk skewed to the upside. January brings annual resets and they tend to surprise on the high side.
Despite the ‘hot’ whisper numbers (and 4 previous Januarys in a row of upside surprises), headline consumer price inflation came in cooler than expected in January (+0.2% MoM vs +0.3% expected). That pulled the headline CPI down dramatically from +2.7% to +2.4% – near the lowest in 4 years.
Core CPI printed +0.3% MoM (in line with expectations), lowering the YoY change in core prices to +2.5% – the lowest since March 2021.
The Shelter index rose 0.2% in January and was the largest factor in the all items monthly increase. The food index increased 0.2% over the month as did the food at home index, while the food away from home index rose 0.1 percent. These increases were partially offset by the index for energy, which fell 1.5% in January.
January saw real average weekly earnings rise 1.9% YoY – its highest since March 2021…
In January the US added 130K jobs, double the 65K median estimate and up from a downward revised December print of 48K (vs 50K previously). This was also the highest monthly jobs increase since December 2024.
Government jobs fell by -42k. Furthering the trend for growing private sector employment and declining government employment.
Compared to Jan 2025, we see the growth in private sector employment and decline in government jobs.
The jobs report comes with the largest jobs revision since 2009/2010.
Now for the bad news, As my OSU/Chicago/GMU know, I prefer NON seasonally adjusted data when at all reasonable. While Seasonally adjusted jobs added SEASONALLY ADJUSTED was +130K, NOT seasonally adjusted jobs added was -2.649 Million.
Happy birthday to Tina Louis (Ginger from Gilligan’s Island) who turned 92 today.
Yikes! The ratio of US Home Prices to US Median Household Income is now higher than the ratio during the catestrophic housing bubble during the latter half of the 2000s.
Here is a chart of home prices and median household incone,
The labor market is truly screwed-up. The December jobs report reveals that women account for nearly all labor force losses.
I ain’t drunk! But it would help in this housing market where housing prices and mortgage rates are much higher than when Joe Biden became President in January 2020. In fact, the Case-Shiller national home price index is 55% higher than when Sleepy Joe took the reins of Presidency and the 30-year mortgage rate is 64% higher.
Because of higher housing prices and mortgage rates,
The Case-Shiller national home price index is 55% higher than when Sleepy Joe took the reins of Presidency and the 30-year mortgage rate is 64% higher.
As a result of higher housing prices and mortgage rate (and Gavin Newsom’s ludicrous policies), it will take over 30 years to accumulate enough savings to buy a home in San Diego, Los Angeles, San Jose and San Francisco.
I ain’t drunk, but first-time homebuyers will need to be drunk in this housing market.
Money makes the world go around and gold prices soar!
Gold is looking eerily like gold prices during the Weimar Republic in Germany.
Tomorrow belongs to Socialists like AOC and Bernie Sanders who want to keep spending. Along with Senator Chuck
Confounded Interest - Anthony B. Sanders 
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