Market 9/18: Labor market gradually cooling, oil prices continue to rise

Current housing market update: Buying a home is becoming a luxury

Strong home price increases make current home buying 30% more difficult than in 2008. Average monthly payment is about to exceed 3,000 USD, a record high

Mortgage rates hit 7.5% peak, highest in 20 years, while the effective rate recorded on home purchase loan contracts is 3.5% further pressuring housing supply.

Although mortgage rates are at record highs, only about 3.3% of home purchase loan contracts are struggling with payments, because 90% of borrowers have rates under 5%, only a small number of new buyers face high rates. This is the difference from the 2008 housing bubble.

Second home purchase demand has dropped -47% and first-time home buyer demand also down -33% compared to pre-Covid. Buyers have disappeared quickly due to the impact of excessively high interest rate increases.

According to University of Michigan data, 60% of consumers say this is not an ideal time to buy a home. Despite weakening demand, high interest rates combined with limited supply continue to drive home prices significantly higher.

Additionally, high interest rates are also eroding builders' confidence. Data on August building permits and new starts will be released tomorrow (09/19).

Oil prices hit 10-month high on supply concerns from Russia and Saudi

Brent oil surpasses 94 USD/barrel after 3-week rally. Additionally, refined products like diesel are showing increasing shortage warning signs, as global refineries are unable to produce enough industrial fuel.

Even though peak season has passed, gasoline prices may continue to rise next week due to surging supply prices.

The current administration has also stopped releasing oil from SPR reserves to stabilize gas prices, partly because reserve levels are no longer sufficient to continue. Data on fuel reserves will be released on Wednesday (09/20) this week.

Auto workers strike day four: UAW rejects wage increase offer

The auto workers strike has entered day four with no solution in sight, UAW's Shawn Fain rejected the 21% wage increase offer saying “That is certainly not enough”. 4.1 million workdays lost, estimated 10-day loss of 5.6 billion USD.

It seems people are feeling the pain of inflation and want higher wages.

Key events this week:

1. August Building Permits data - Tuesday

2. New Housing Starts data - Tuesday

3. Fed interest rate decision - Wednesday

4. FOMC press conference - Wednesday

5. Initial jobless claims - Thursday

6. Existing home sales data - Thursday

Other news:

• Goldman Sachs predicts this week will be the Bank of England's last rate hike, peaking at 5.5%, vs prior expectation of 5.75%.

• Tesla in preliminary discussions with Saudi Arabia about building an electric vehicle factory.

• Ferrari says it has resumed its long-term partnership with sports company Puma (PUMA) and Puma will become the company's premium partner.

• Tech giant Cisco cuts 350 jobs in latest layoffs.

• According to Financial Times, after Arm, SoftBank is considering further investment in artificial intelligence, specifically OpenAI.