The Long Term Investor

A pretty powerful close today. The pressure builds up and things just have to let lose......as in explode up. We finally saw some catch-up to the great earnings this week today. I was ALL green today....across the board. I also get a nice beat on the SP500 by 0.73%. that is a pretty good beat considering that the SP500 was up massively today by +2.43%.

 

It turned out to be a very nice week. All the averages that count....at least for me....were in the green for the week.

DOW year to date (-4.44%)
DOW for the week +1.34%

SP500 year to date (-7.01%)
SP500 for the week +0.77%

NASDAQ 100 year to date (-11.43%)
NASDAQ 100 for the week +0.11%

NASDAQ year to date (-11.98%)
NASDAQ for the week +0.01%

RUSSELL year to date (-12.33%)
RUSSELL for the week (-0.98%)

Nice to see the NASDAQ POSITIVE for the week.....even if it is only by 0.01%.

TGIF.......we get to head into the weekend with a little bit of extra money in our accounts.

 

Looks like one of my ten companies has a new CEO. At least it was an internal pick with a long history with the company. A new CEO is always a potential turning point....for better or worse....for any company. I think this one will be ok....but I will watch and wait.

Home Depot picks veteran Ted Decker as new CEO

https://www.cnn.com/2022/01/27/business/home-depot-ceo-ted-decker/index.html

(BOLD is my opinion OR what i consider important content)

"Home Depot Inc on Thursday named 22-year company veteran Edward Ted Decker as its new chief executive officer and president, replacing Craig Menear, who will continue as chairman.

Decker, who has been the U.S. home improvement chain's chief operating officer since October 2020, will take over the top job from March 1.

He has also served as chief merchant and executive vice president of merchandising, where he overlooked store and online merchandising departments, among other responsibilities.

The company has lately seen a surge in demand from contractors such as builders and handymen looking to complete a backlog of home improvement projects that were put on hold during the COVID-19 crisis."

MY COMMENT

If my local Home Depot is any indication....their contractor business is BOOMING. When I go there.....something I do often.......the contractor vehicles take up a large portion of the parking lot. In this part of the country......there do not seem to be any old fashioned lumber yards left anymore. I LOVE it.

 

This is definately good advice for the average investor.

Column: Millions of Americans are fixated on stock prices. They shouldn’t pay such close attention

https://www.latimes.com/business/story/2022-01-26/why-do-we-care-about-the-stock-market-so-much

(BOLD is my opinion OR what I consider important content)

Following the Dow, are you?

The widely watched stock market indicator has been all over the place this month: two triple-digit gains and no fewer than 10 triple-digit declines out of the 17 trading days so far this year (including Wednesday, when the market rolled over after the Federal Reserve Board projected an interest rate hike as soon as March).

On Monday, the blue-chip index fell more than 1,100 points, or about 3.25%, from the previous close, only to end the day nearly 100 points higher.

The broader stock market also has been in a swoon. The Standard & Poor’s 500 index has fallen by 7.5% this month, after gaining nearly 27% in 2021.

If you’re paying close enough attention to be alternately clutching your chair arms until your knuckles turn white and taking deep breaths of relief, you’re doing it wrong.

The ups and downs of the stock market, especially the widely cited Dow Jones industrial average, communicate an easily accessible narrative through which to grasp economic trends.

As the Nobel Prize-winning economist Robert Shiller observed in his 2019 book “Narrative Economics,” these stories allow us to construct a coherent picture out of a welter of complex and confusing events and conditions.

The narrative built to explain the stock market boom of 2000, he wrote, brought together the advent of the World Wide Web, baby boomers entering retirement, the decline in inflation, and optimism about business — “seemingly unrelated narratives that all happened to be going viral at around the same time.” That narrative held only temporarily, however, because the bubble burst in 2001.

The narrative fashioned around stock market indexes, Shiller wrote, persists in part because the daily changes are incessantly reported by the news media and because “people widely believe that the stock market is a fundamental indicator of the economy’s vitality.”

That’s often misleading, however. “Much more relevant is growth in GDP"—gross domestic product—"especially over the long term,” says Edward Wolff, a professor of economics at New York University.

More important, the stock market is irrelevant to most people’s financial situation. “For the middle class, wages are much more important than stock prices,” Wolff says.

For the vast majority of Americans, any fixation on the short-term ebb and flow of stock prices — especially daily price changes — may even be financially unhealthy.

There are several reasons why that’s so. To begin with, most Americans have little or no direct exposure to the stock market.

Only about 15% of all families own shares of stock directly, and even that figure is skewed by significant holdings by the top 10% of households (those with net worth of $1.2 million or more); about 44% of those households own stocks directly.

Among households with net worth around the national median of $121,700, only about 11% own shares of stock; among the poorest 20%, with net worth of $6,400 or less, only about 5% own stocks. (The figures are from the Federal Reserve’s latest triennial Survey of Consumer Finances, which was published in 2019.)



Overall, direct stock holdings have fallen from their high point of 21.3%, reached in 2001. Two market crashes drove American families out of love with the stock market, though holdings have recovered a bit from their low point of 13.8% in 2013.

About 53% of all households own stock in one form or another, but they do so mostly through retirement accounts.

Holdings in defined contribution plans such as 401(k)s tend to be in stock mutual funds, such as index funds — about two-thirds of the more than $7.3 trillion invested in 401(k) plans as of mid-2021, according to the Investment Company Institute. An additional 10% is placed in bond or money market mutual funds.

These are professionally managed, so they tend to be comparatively immune to the sort of emotional reactions that can prompt investors to make the wrong decisions at the wrong moments — panic-selling during downturns or overly exuberant buying during bull frenzies, for example. They’re also designed to build wealth over decades, capturing long-term economic trends instead of being buffeted by short-term swings.

Defined benefit pensions, through which workers are guaranteed payouts based on their wages and job longevity, provide even more of a buffer from stock market swings, since it’s the managers of the pension funds, not the workers, who shoulder the market risk.

Even within the top 10%, direct stock holdings represent a fairly small proportion of their assets. “Though 70% of the top 10% directly own stocks,” economist Teresa Ghilarducci of the New School told the Senate Banking Committee last year, “it is only 13% of their wealth.” Businesses they own, real estate and retirement accounts and pension plans account for more than half their net worth, on average.

Over the last year or two, the narrative of stock trading as a pathway to wealth has gained in prominence. As Ghilarducci asserts, that’s a distinctly unwholesome development, especially for younger people who may just now be entering their prime earning years.

A surge in interest in short-term stock trading has been spurred by zero-commission brokerages such as Robinhood, which plies young investors with the impression of stock trading as a fun game and the notion that stock trading needed to be “democratized” — that is, removed from the control of big Wall Street players and placed in the hands of the retail trader.


“Robinhood has pushed financial literacy in reverse rather than advancing it,” Ghilarducci told me. “Places like Robinhood are making lots of money out of promoting this ideology of ‘democratization.’ They’re really hitting people who are used to electronic games, like young men. That’s distorting the decisions of some people, putting them at great risk.”

Robinhood is not only making a game of stock trading but also luring customers into riskier investments such as options and nonsensical investments such as cryptocurrencies.

“We have to regulate these financial predators who traffic in the idea that wealth-building will happen if people have access to these risky products and services,” Ghilarducci says.

She’s right. The truth is that for a majority of Americans, the principal source of wealth isn’t savings accounts, private retirement plans, stocks and bonds, or home equity. It’s Social Security.

For households with a member over 52, the program’s median contribution to the retirement nest egg — that is, the present value of expected payouts for those who claim benefits at full retirement age — is larger than that of any other source except among the richest 10%, according to Ghilarducci’s calculations.

For them, Social Security’s median contribution of $274,966 is exceeded by home equity (median value of $400,000) and private retirement plans (median holdings of $823,000).

In 2015, the latest calculations available, Social Security accounted for more than half the income of 37.3% and more than nine-tenths of the income for 12.1% of men over 65. The program provided more than half the income for 42% and more than nine-tenths of the income for about 15% of women over 65.

That underscores the imperative of protecting Social Security from efforts at tampering, such as President George W. Bush’s plan to privatize the system, and proposals to cut benefits. “Across-the-board cutbacks in benefits,” MIT economist James Poterba wrote last year, “would place heavy burdens on the subset of beneficiaries who are highly reliant on this program for retirement support.”

Fascination with stock-picking may stem partially from doubts that Social Security will exist long enough to safeguard Americans’ retirements decades from now. Another factor is the recognition that the private pension structure of the past, through which employers rewarded workers for their long-term loyalty, has collapsed; fewer than 1 in 5 American workers have access to those pension plans.

That system has been supplanted by 401(k)-style defined contribution plans, which place the responsibility for funding, as well as the risks of market reversals, on the workers themselves.

Defined contribution plans, however, favor higher-wage employees far more than did the old-style defined-benefit pensions. Some 44% of all households participate in a defined contribution plan sponsored by an employer, but participation ranges from only 10% among the lowest-wage 20% of families to 70% among the top fifth.

That could reflect the difficulty that lower-wage families have in setting aside contributions for their retirement, as well as the greater tax savings that richer workers obtain by placing some of their income in the tax-advantaged plans.

The emergence of weird get-rich-quick come-ons such as cryptocurrencies and nonfungible tokens, or NFTs, distracts from the fact that “the federal government is the most important financial partner for most Americans,” Ghilarducci says.

That’s true. Social Security is an indispensable bulwark against poverty for its 65.2 million beneficiaries; Medicare covers medical expenses for 61 million enrollees, mostly age 65 or older; and Medicaid provides medical coverage for 82 million lower-income Americans, including children. The stock market has no impact on any of these programs.

Americans who want to devote mindshare to how to build and protect their wealth for the long term should spend it on making sure that our political leaders focus on making them stronger.'

MY COMMENT

Some interesting data above about stock and fund investing participation as well as Social Security. One thing is sure....the average person has no need to watch the daily markets. I am a big one to say that......since I am on here every day watching the markets. the best course for the vast majority of investors is to.....invest it and forget it.

 

Well Zukodany....I said the FED or "other government actions". In my view the actions of the government directly caused the 2008/2009 near world-wide economic collapse. Policies that were put in place years before encouraged and allowed the massive fraud that occurred in the mortgage markets. The government allowed and encouraged the huge numbers of fraudulent loans....often made to people that had no business buying a home......and than sat back and allowed the rampant leveraging of those loans in the form of derivatives.

This covers some of what I am talking about:

The Fall of the Market in the Fall of 2008

https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp

 

As an Apple share holder I like this little article.

Apple could have another blowout year amid ‘scary’ demand for its products

https://finance.yahoo.com/news/appl...her-huge-year-for-iphone-giant-211603380.html

(BOLD is my opinion OR what I consider important content)

"Apple (APPL) helped kick off Big Tech’s earnings season on Thursday with its best quarter in history.

Revenue came in at $123.95 billion, an 11% jump over last year’s Q1 revenue, which itself was a record at the time.

To top it off, the company continues to dominate in one of its most important markets: China. Revenue in the region, Apple’s third largest, jumped 20% on the strength of iPhone 13 sales.

Yes, part of that likely stems from the fall of China’s Huawei, which has been cut off from everything from chips to the Android operating system due to U.S. intervention. It’s a massive boon for Apple nonetheless. What’s more, the company managed all of this despite the continuing global chip shortage.

And analysts say the ride isn’t over for the iPhone maker. It still has two new product categories reportedly coming down the pike: a VR/AR headset and the long-rumored Apple car. With those new categories plus a slew of new iPhones and Macs set to land this year, Apple could be on track for one of its best years ever.

“They beat a lot, and imagine if they didn’t have the supply constraints,” Citi managing director in equity research Jim Suva told Yahoo Finance Live. “[It’s] scary in a good way of how much demand is out there for the Apple products.”

Apple’s iPhone continues to drive the company

Of course, Apple’s iPhone line generated most of its revenue last quarter. The phones raked in an incredible $71.6 billion in revenue, a 9% jump over Q1 2021. That works out to 57.7% of Apple’s total quarterly revenue.

That revenue came in despite Apple having to contend with the global chip shortage, which dinged sales of its iPad in the quarter.

“We would characterize this quarter as a ‘stunner’ on iPhone/Services demand and Cupertino's ability to navigate a supply chain shortage in almost Teflon-like fashion,” Wedbush analyst Dan Ives wrote in an investor note.

And the company is expected to launch a 5G-capable iPhone SE sometime in March or April, Bloomberg reports. That device should have a starting price lower than the iPhone 13 mini, which is priced at $699, helping to bring in consumers who want to get into the Apple ecosystem without breaking the bank. For reference, the current iPhone SE sells for $399.

With news that Apple could soon allow the iPhone to receive contactless credit card payments in the coming months, a potentially massive blow to the likes of Block’s Square (SQ), the company could see even greater interest from small and medium businesses.

Couple that with its small and medium business outreach, which includes special pricing on the company’s collection of business-ready apps and customer support, and the iPhone looks to be set for a strong 2022. And that’s without including Apple’s iPhone 13 successor, which will likely be announced sometime in September.

New product lines will drive the company into the future

While the iPhone is certainly Apple’s most important device, investors and analysts are looking to the future, namely the new product lines Apple is expected to announce in the coming months and years.

The company’s long-rumored AR/VR headset is said to land sometime this year. While it could be priced as high as $3,500, it could help drive AR and VR adoption and also put Apple at the top of the heap when it comes to the metaverse, the 3-D version of the internet that inspired Facebook (FB) to change its name.

“We think AR and VR are going to be very big for Apple,” Suva said. “Apple may not be the first into areas, but when they go in, their product is really premium and [a] really good to great user experience.”

Apple CEO Tim Cook pointed to the company’s ongoing work in AR in his remarks during Apple’s earnings call, but stayed away from mentioning the metaverse in particular.

“We see a lot of potential in this space and are investing accordingly,” Cook said.

It’s not just Apple’s upcoming headset that’s driving investor interest. The company is also in the midst of developing its own self-driving electric car, which, if it comes to fruition, would open up an entirely new market for Apple. It’ll have steep competition from the likes of Tesla (TSLA) and legacy automakers like GM (GM) and Ford (F) that are plowing money into the EV space — but Apple’s name recognition alone could help power vehicle sales.

“I expect investor anticipation of the new addressable markets over the next five years — including the metaverse and autonomy — to increase [Apple’s price] multiple to 35x,” Loup Ventures’ Gene Munster wrote in a note following Apple’s earnings release. The company’s shares are currently trading at a 30x multiple.

All of this, of course, depends on whether Apple enters these markets to begin with. Hopefully, we’ll find out more later this year."

MY COMMENT

I dont put much weight on the "CAR" stuff. But the rest of this little article is right on. The head-set has the potential to be long term GOLD. I dont see much competition for Apple at the moment. Most of their direct competition seems to have faded away.

 

That is a BUMMER Zukodany. The BRUNT of the economic closure will be felt over many years by the small business community. Are your tenants moving to other space or hanging it up for good?

 

I mentioned above how small business has taken the BRUNT of the Covid disaster.

Inflation, supply and labor woes a 'triple whammy' for Omicron-hit small biz

https://finance.yahoo.com/news/smal...-of-inflation-supply-and-labor-140059222.html

(BOLD is my opinion OR what I consider important content)

"The rapid spread of the Omicron variant has hobbled businesses of all sizes and sectors, with some mom-and-pop operations on the brink of shuttering.

Even big retailers like Macy’s (M) have cut hours as coronavirus cases spike and workers call in sick, with the issue magnifying long-running labor shortages and supply chain shortages that continue to bedevil Main Street.

A whopping 98% of small business owners seeking to hire new workers said hiring and retaining their workforces is hurting their bottom line, according to a new Goldman Sachs Survey, conducted between January 10-13, and including almost 1,500 small business owners from 48 states. At least a third found that 2021 was even more challenging than 2020, when COVID-19 first appeared on the scene.

The data found that 84% of operators reported rising inflation as a major concern, with 76% of the respondents saying widespread price hikes are financially crippling. Business owners cited labor shortages as the most significant challenge, with 87% currently finding it difficult to recruit qualified candidates for open positions.

And more than a third of respondents, (37%) said their business had been forced to temporarily close or scale back operations from the recent rise in COVID-19 cases.

“We really see what effectively is a triple whammy of labor shortages, supply chain disruptions and inflationary pressures,” Joe Wall, National Director of Goldman Sachs 10,000 Small Businesses Voices, told Yahoo Finance Live this week.

“If you look at our data back in September [versus] today, what you see is that across the board, everything has gotten worse,” he added.

'Very significant' impact from Omicron

Omicron issues have been widespread across a variety of sectors, data from Alignable show.
The dour sentiment among small businesses was also reflected in a January survey of over 6200 small business owners from Alignable.

The data found Omicron battered over half of small businesses in the U.S. and Canada, and took a toll on their January revenue. A sliver of those businesses were forced to shut down by the variant, with more calling it a "very significant" impact on their operations.

A lack of staffing and the surge in COVID infections have been a real challenge for Paul Austad, who owns Nela Athletics in Los Angeles.

“We can't get enough staff to help with the demand,” Austad told Yahoo Finance. “We've used two large entity hiring platforms and we have them ongoing [but] the trouble we're having is getting people with the certifications that we need in group coaching.”

Austad noted that there have been plenty of applicants with personal training certificates — but that’s not enough for his CrossFit gym business model.

“We are not finding those types of staff members and that's a big learning curve and right now we don't have the capacity to train people,” he added. Meanwhile, membership has dropped and is slowly creeping back up, which presently is at 60% of where the business was pre-COVID.

Despite new year fitness resolutions that normally drive clients into the gym, Austad said traffic is up a slim 4% from December levels.

Weight loss and working out are among the most common new year trends, even though many fall away within months. But Omicron is worsening the impact.

“People aren't comfortable going back in. We have been able to stay sustainable through personal training,” Austad told Yahoo Finance. However, “our personal training is a revenue generator, not a profit generator.”

Great resignation sparks 'great transition'
Labor shortages show no signs of easing as record numbers of U.S. workers quit their jobs, creating headaches for businesses trying to keep positions filled.

"The labor market going forward is in a period of great transition with workers regaining some of the bargaining power they had lost over the past four decades," Jeremy Schwartz, an associate professor of economics at Loyola University, wrote in an email to Yahoo Finance.

"The labor market in the coming years might look very different from how firms attract and retain workers, to what industries may be hiring, to even the length of the work week,” he added.

Goldman's data also highlighted that supply chain bottlenecks are continuing to put pressures on small businesses. Among respondents, 68% reported concerns with ongoing supply chain constraints and 69% say the issues have negatively impacted revenue.

“Only 13% of small businesses that have been impacted by disruptions to their supply chain think that it's going to ease up in the next six months,” Wall told Yahoo Finance. “Not a lot of confidence in terms of getting better anytime soon.”

Additionally, two-thirds reported that suppliers favor large operators in their space, and are getting priority over them due to their “large volume” of orders. That causes smaller businesses to get “the short-end of the supply chain crisis,” Goldman said.

A majority believe their overall operating conditions will improve in the months ahead, and 73% feel optimistic about their financial trajectory of their business this year.

But given the economic uncertainty and ongoing strains from COVID, "a lot of small business owners just don't feel like they can catch a break,” Wall said.

Meanwhile, an overwhelming number of small business owners, 82%, said they’d like to see the federal government provide additional emergency financial relief.

“If you talked to just about any small business owner, no one wants a handout,” Wall said, saying federal funding would be "a good first step" for cash-strapped entrepreneurs."

MY COMMENT

Small business got SCREWED during the Covid shut-down. Just about EVERY large company simply stayed open with no restrictions.

Now the small businesses are struggling to find workers, keep workers, and deal with the supply issues. It is a shame....but....I dont see any solution other than trying to simply....gut it out......and somehow manage to keep going. I am sure there will be a FLOOD of small business closure over the next few years. The big corporate jobs are nice.....but it is small business that is the lifeblood of the economy

 

PLEASE.......NOOOOOOOOO.

 

I often put something up on real estate on the weekend.

Definitely feeling a sense of urgency to buy' before interest rate hikes: Home seeker

https://finance.yahoo.com/news/defi...of-urgency-to-buy-house-seeker-151516678.html

(BOLD is my opinion OR what I consider important content)

"It's been a frustrating pandemic-long journey for house seekers like Adan Martinez. He's been hoping to buy his first home near Harlingen, Texas, with a budget of $200,000.

"There were several homes I was interested in but waited off on, $180K and $215K, respectfully. But mid-year last year, prices on them jumped to well over $50K-80K," Martinez told Yahoo Finance.

The rush to find a home is now greater than ever. Home prices keep rising — as mortgage rates inch higher.

"[I'm] definitely feeling a sense of urgency to buy and take advantage of lower interest rates. But as is the case when the rates are high, many homes will be available, but way out of my budget," he said.

Adding to the pressure, house hunters are seeing far fewer options compared to last year. Pending home sales, which measure contracts on residencies set to close, were down far more than expected in December, amid acute tight inventory.

'I'm never selling my place. I'm keeping it for my family'

The secondary and vacation property areas are just as competitive, even as rates tick higher. Jocie Jandovitz, a realtor based out of Naples, Florida, says homes are flying off the shelves for well over regular market value.

"I would say probably 90% of our transactions, particularly right now are cash," Jandovitz told Yahoo Finance. "They might get a loan, but they don't care really what the rates are going be."

The real-estate agent estimates supply in the area is at roughly 25% of normal levels. Potential sellers are sometimes reluctant to list for fear of not finding another property.

High inflation is also making home owners think twice about selling. Jandovitz says some of them insist, "I'm never selling my place. I'm keeping it for my family."

"People feel like they have a really strong asset that they don't want to let go of — and that they'd like to keep, to see where it goes. They feel like it's valuable," she adds.

Vacant developed lots, 'I think that's the biggest constraint'

Throughout much of last year, builders ran into supply-chain bottlenecks on everything from front doors to windows, roofs and tiles. Those issues contributed to delays in the completion of new homes.

"The builders have been battling like whack-a- mole forever, it feels like," said David O'Reilly, CEO Howard Hughes Corporation (HHC), the largest developer of master plan communities in the U.S.

On the bright side, supply chain challenges appear to be easing somewhat. December's housing completions were up 22% month over month, at roughly 96,000.

"That's the first time in 18 months, we've been over 80,000. So if home builders are completing homes at what is a breakneck pace ... they're starting to figure out those supply chain issues," said O'Reilly.

He points out the bigger challenge is the ability for builders to get their hands on vacant developed lots. When the pandemic hit, land developers thought there would be a housing slowdown as the country went into lockdown mode. They initially put the breaks on their efforts to develop lots. Reversing that hiatus has been riddled with delays.

"I think that's the bigger constraint," said O'Reilly. "Permitting has been delayed because government agencies have been reluctant to bring workers back or when they have, they've been at part staff. There's been some meaningful weather delays in some areas of the country like Florida and Houston that had very wet summers last year," he said.

"I think it's going take about two years to close that gap so that builders can get access to those vacant developed lots to keep up with their incoming orders,' added O'Reilly.

'I should have bought what was available then'

The value of the entire residential real estate market in the US jumped by almost $7 trillion 2021, by far the largest growth of any given year, according to research by Zillow.

The housing market is now worth $43.4 trillion – more than double from a decade ago, since the post-Great Recession lows.

Fannie Mae forecasts home prices will rise another 7%-8% in 2022. That's one of the more conservative estimates. Last quarter, Goldman Sachs predicted home prices will grow another 16% by the end of this year.

The pandemic has proven that hindsight is 20/20 for those still searching for a house, like Martinez.

"I should have bought what was available then. Waited for something better, but along with that came better selling prices for the sellers.""

MY COMMENT

The media line of .....EXPERIENCES over reality........is over with and reality won out as usual. Young people that were smart bought when they could and avoided the panic and rush to buy that we are seeing now.

In desirable areas....it is not going to improve. The cash buyers dont care what rates are and in areas like where I am a very large percentage of the buyers have cash. People that are young or new buyers are going to get SQUEEZED by the escalating mortgage rates and the rising house prices. It WILL continue to be a BRUTAL....housing market for buyers.

Buyers will need to be smart and decisive and willing to make the jump when they find the right house. BUT....on the other hand they need to avoid panic buying just to buy........"something".

For those of us that already own a home.....it is the GLORY DAYS of residential real estate gains.

 

AND.

Home prices will grow a further 16%' by end of next year: Goldman forecast

https://news.yahoo.com/home-prices-...-of-next-year-goldman-forecast-203019920.html

(BOLD is my opinion OR what I consider important content)
"If you thought home prices couldn't go any higher, hold on to your hat: Goldman Sachs (GS) economists are forecasting even more price increases in the year ahead.

"Our model now projects that home prices will grow a further 16% by the end of 2022," wrote a Goldman Sachs team of economists led by Jan Hatzius in a recent note.

"Of all the shortages afflicting the U.S. economy, the housing shortage might last the longest," he said.

Home prices are currently up 20% year-over-year. The boom in prices was spurred by tight housing inventory, low interest rates, and household migration patterns during the pandemic. Millennials buying first time homes has only exacerbated the demand for houses.

Meanwhile investors with cash on their hands are trying to hedge against inflation by purchasing hard assets like real estate, thus driving prices higher.

"The supply-demand picture that has been the basis for our call for a multi-year boom in home prices remains intact," wrote Hatzius.

"Housing inventories remain historically tight, and surveys of home buying intentions remain at healthy levels," the note goes on.

Numerous experts have predicted not to expect a housing crash like in 2008, given that the current market is so different. But home buyers may expect to see a leveling off in prices, especially if the Federal Reserve starts tapering its balance sheet and increasing interest rates in the future.

'Homebuilders continue to face headwinds'

The supply of homes has increased modestly since the spring, though still well below pre-pandemic levels.

Supply chain issues are slowing down efforts to get new homes on the market.

"Homebuilders continue to face headwinds that were present before the pandemic — especially a lack of construction workers and a lack of available plots to build on — and the pandemic has exacerbated those problems," said Hatzius.

His team points to further delays from supply chain disruptions, lumber shortages, and now economy-wide labor shortages.

'Relaxing the zoning rules and other regulatory constraints'

There is a solution to the national housing shortage which could help ease prices.

"Economic research shows that relaxing the zoning rules and other regulatory constraints that have impeded homebuilding for decades would boost supply and lower prices and rents. But in practice, this has been difficult politically," the note says.

California recently banned single-family zoning statewide, making way for more multi-family dwellings.

However, "nationwide changes seem unlikely for now, and limited state and local changes are only a partial step toward relieving the housing shortage," writes Hatzius."

MY COMMENT

If anything I think this prediction is LOW for many areas of the country. The great BULK of the Millennial generation is now in home buying age. Money from cash buyers is pouring into the real estate market. Great news for sellers.....bad news for buyers.