“Buying a house is like playing Monopoly, except the game never ends and the bills are real.”
Chart of the Day
Good morning!
Conventional wisdom has long operated on the assumption that homeowners tend to be wealthier than renters. That seems logical, since the costs associated with owning a home have tended to be higher. Popular wisdom is that therefore, homeowners typically more disposable income than renters and spend more on things like dining out, travel, and entertainment.
Recent research suggests that the tables might have flipped.
It’s still more expensive to own a home than to rent. In fact, the gap might be getting wider, according to a report published last month by Redfin. The real-estate company reported that the gap between costs for homeownership and renting in the U.S. is widening to unusually high levels: To afford a median-priced home, a household now needs to bring in $116,633, while a median-priced rental requires annual household income of $64,160 – a difference of more than $52,000. To put it another way, owning a home requires 81% more income. That’s consistent with a Bankrate study published around the same time that reported similar findings. In the 50 largest metropolitan areas, renting is more affordable than the monthly costs associated with owning a home (including mortgage, property taxes, and insurance, which have all skyrocketed of late.)
Yet while homeownership seems to still be more expensive relative to renting (and getting moreso), the correlation between household wealth and spending might be weakening. The Wall Street Journal reported that an increasing share of those who could afford to buy a home are still choosing to rent. For some, that choice is linked to a shortage of homes on the market, leaving them unable to find a place they really like and want to own. Others cite the time costs associated with ownership, complaining about hours spent on maintenance or planning/implementing renovations. Redfin noted a similar trend, suggesting that wealthier renters also find comfort in the ease of relocation in case an attractive job opportunity requires it.
If wealthier households – which tended to have more disposable income to begin with – continue to increasingly show a preference for this lower-cost housing option, it could result in their having even more disposable income available.
That leads to an interesting question: could this soon be a tailwind for consumer discretionary companies?
Share your thoughts
What are some consumer discretionary companies that you feel could benefit if wealthier households lower their fixed housing costs and see a rise in disposable income? Click here to send us your stock picks.
📧✍️Here’s what a reader commented📧✍️
Question: Do you think now is a good time for Warren Buffett to step down?
Answer: Let me first say, I love Buffett. His investment philosophy and his vibe. I don’t agree with everything he says or does, but you have to respect him. That said, I think the best time for him to step down was 10 years ago. I know Buffett is Berkshire and Berkshire is Buffett. But if you thought he was involved in any kind of day-to-day level, you’ve never met a 90-year-old.
Catch up with FS Insight
Investors are generally wary that today’s May Fed meeting could mark the “top” for stocks in 2025, but in our view, the risk/reward is better today than before Fed Chair Jerome Powell’s hawkish Jackson Hole speech 2022.
Technical
Tuesday’s U.S. equity market finish failed to close on an inspiring note. However, this doesn’t do much damage to the near-term technical picture.
Crypto
We share insights gleaned from the Medici conference, including thoughts on allocator sentiment and renewed caution around altcoins.
News We’re Following
Breaking News
- US, China to hold ice-breaker trade talks in Geneva on Saturday REU
- Disney lifts profit outlook after delivering solid parks, streaming results YF
Markets and economy
- Trump trade tariffs slump widens to ‘nearly all U.S. exports,’ supply chain data shows CNBC
- Mark Carney tells Donald Trump Canada is ‘not for sale’ FT
Business
- Super Micro issues weak guidance, cites ‘economic uncertainty and tariff impacts’ CNBC
- Delta must face passenger lawsuit over massive computer outage REU
- WeightWatchers files bankruptcy to adapt to chemically induced weight-loss future WSJ
- Maker of Pegasus spyware told to pay $167m for WhatsApp hack BBC
Politics
- U.S. orders intelligence agencies to step up spying on Greenland WSJ
- IRS loses nearly 1 in 3 tax auditors in DOGE cuts, watchdog report finds CNBC
- States, cities face funding collapse threat with Trump cuts BBG
Overseas
- UK and India agree trade deal after three years of talks BBC
- India, Pakistan trade military strikes after Kashmir attack BBG
- Trump says US will stop bombing Houthis in ceasefire apparently brokered by Oman SEM
- Disgraced ex-Goldman partner sought by Malaysia for extradition in 1MDB scandal WSJ
Of Interest
- Conclave to choose next Pope gets underway SEM
- A woman who disappeared from Wisconsin more than 6 decades ago has been found safe AP
| Overnight |
| S&P Futures +30
point(s) (+0.5%
) Overnight range: -17 to +64 point(s) |
| APAC |
| Nikkei -0.14%
Topix +0.31% China SHCOMP +0.8% Hang Seng +0.13% Korea +0.55% Singapore +0.13% Australia +0.33% India +0.17% Taiwan +0.12% |
| Europe |
| Stoxx 50 -0.38%
Stoxx 600 -0.38% FTSE 100 -0.33% DAX -0.17% CAC 40 -0.63% Italy -0.3% IBEX -0.71% |
| FX |
| Dollar Index (DXY) +0.24%
to 99.47 EUR/USD -0.11% to 1.1358 GBP/USD -0.25% to 1.3335 USD/JPY +0.58% to 143.27 USD/CNY +0.09% to 7.2256 USD/CNH +0.15% to 7.2208 USD/CHF +0.28% to 0.8243 USD/CAD +0.16% to 1.38 AUD/USD -0.38% to 0.647 |
| Crypto |
| BTC +2.4%
to 96973.06 ETH +3.85% to 1843.77 XRP +0.89% to 2.1467 Cardano +3.52% to 0.6857 Solana +2.68% to 147.88 Avalanche -0.45% to 19.92 Dogecoin +3.27% to 0.1738 Chainlink +3.36% to 13.95 |
| Commodities and Others |
| VIX -1.49%
to 24.39 WTI Crude +0.78% to 59.55 Brent Crude +0.61% to 62.53 Nat Gas +3.52% to 3.58 RBOB Gas -0.02% to 2.064 Heating Oil +0.25% to 2.014 Gold -1.62% to 3376.33 Silver -1.17% to 32.84 Copper -1.26% to 4.676 |
| US Treasuries |
| 1M -1.3bps
to 4.2815% 3M -0.0bps to 4.3014% 6M -0.3bps to 4.2053% 12M +1.0bps to 3.9956% 2Y +2.1bps to 3.8034% 5Y +1.7bps to 3.9097% 7Y +1.6bps to 4.1038% 10Y +1.8bps to 4.3121% 20Y -0.1bps to 4.8099% 30Y flat at 4.797% |
| UST Term Structure |
| 2Y-3
M Spread widened 0.6bps to -53.2
bps 10Y-2 Y Spread narrowed 0.1bps to 50.7 bps 30Y-10 Y Spread narrowed 1.4bps to 48.3 bps |
| Yesterday's Recap |
| SPX -0.77%
SPX Eq Wt -0.74% NASDAQ 100 -0.88% NASDAQ Comp -0.87% Russell Midcap -0.9% R2k -1.05% R1k Value -0.61% R1k Growth -0.92% R2k Value -0.74% R2k Growth -1.34% FANG+ -0.57% Semis -0.93% Software -1.42% Biotech -6.63% Regional Banks -1.03% SPX GICS1 Sorted: Utes +1.23% Energy +0.1% Cons Staples -0.17% Comm Srvcs -0.5% Fin -0.52% Tech -0.63% Materials -0.66% REITs -0.69% SPX -0.77% Cons Disc -0.85% Indu -0.85% Healthcare -2.75% |
| USD HY OaS |
| All Sectors +8.0bp
to 413bp All Sectors ex-Energy +8.2bp to 372bp Cons Disc +11.0bp to 414bp Indu +10.9bp to 306bp Tech +10.0bp to 383bp Comm Srvcs +5.3bp to 573bp Materials +9.8bp to 386bp Energy +0.8bp to 480bp Fin Snr +9.6bp to 341bp Fin Sub +3.0bp to 329bp Cons Staples +10.4bp to 285bp Healthcare +7.1bp to 419bp Utes +4.6bp to 281bp * |
| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 5/7 | 2PM | May 7 FOMC Decision | 4.5 | 4.5 |
| 5/8 | 8:30AM | 1Q P Nonfarm Productivity | -0.8 | 1.5 |
| 5/8 | 8:30AM | 1Q P Unit Labor Costs | 5.1 | 2.2 |
| 5/8 | 11AM | Apr NYFed 1yr Inf Exp | n/a | 3.58 |
| 5/13 | 6AM | Apr Small Biz Optimisum | 94.4 | 97.4 |
| 5/13 | 8:30AM | Apr CPI m/m | 0.3 | -0.1 |
| 5/13 | 8:30AM | Apr Core CPI m/m | 0.3 | 0.1 |
| 5/13 | 8:30AM | Apr CPI y/y | 2.4 | 2.4 |
| 5/13 | 8:30AM | Apr Core CPI y/y | 2.8 | 2.8 |