Published October 23, 2026
This week we have a lesson in 3 charts about the state of the US housing market. In the first chart we see the rates for 30Y and 15Y fixed rate mortgages all the way back to 1970. The takeaway is that while rates are historically on the low end, the recent rise is only comparable to the rate increase that occurred at the end of the 1970s into the early 1980s that significantly contributed to the US falling into a series of painful recessions (gray bars).
In this next chart, you see both the median household income (blue line) and the household income required to qualify for a conventional mortgage for a median-priced home (yellow line). The prior peak of July 2006 was the point at which 146% of the median income was required to buy a median-priced home. We have just reached that level for the second time ever. Historically, on average, these peaks have not been good times to invest in residential real estate and you may recall that US home prices suffered fairly significant price declines in most of the US during the period of 2008-2012.
This last chart is the number of US existing homes sold every month. You’ll immediately see that once the Fed started hiking rates in 2022 in an attempt to cool post-COVID inflation, home sales start to fall precipitously and continued to reset to new much lower levels. Prior to COVID, about 5,500 existing homes were sold every month. Now that number is in danger of running consistently below 4,000.
Why is important? Home sales are part of the lifeblood of the US economy. When people buy a new home they buy paint, carpet, landscaping and such. They buy furniture and durable goods such as washing machines and dishwashers (btw Whirlpool – WHR – is at the precipice of bankruptcy right now). They also hire people to update plumbing and electrical and other upgrades and/or remodels. And those people in turn go buy new trucks, tools and meals. The multiplier effect of home sales has historically been a key driver of a growing economy, especially as the population grew. Of note, the US population is experiencing historically low growth of less than 0.5% annually and is actually in danger of shrinking for the first time in over 100 years if current trends continue.
What does this mean for home prices? Home prices, on average, are very likely to fall from current levels OR interest rates need to drop A LOT, or both. And for stocks? Well Home Depot (HD) is down about -20% from its recent peak and competitor Lowe’s (LOW) is down -30%. Suffice to say, if interest rates do not come down soon (and that may not be sufficient), the damage to stocks seems likely to spread, all other things being equal.
Market Update
On Monday, the NASDAQ 100 had its best day in nearly a month surging +1.1% with Amazon leading tech shares higher, vaulting +5%. Neocloud stocks however weakened throughout the day, with Coreweave giving up an early +7% gain to close down -2%. In the end, tech stocks bounced but the broader market didn’t follow — most U.S. stocks finished lower. Still the S&P500 finished +0.4% higher due to the tech rally.
Tuesday, stocks began the day weak until the announcement of a tentative agreement between the US and Iran to end the war sent stocks shooting higher – the new turned out to be false but somehow shares held most of the gains. Oil prices that had risen all the way to $110 in overnight trading fell rapidly, closing at $98, still an elevated (and economically damaging) level. Tech stocks still had a rough time, with semiconductor stocks flat and Meta, Arm, Google, Apple, and Microsoft all losers on the day despite the broad market relief rally. Notably, despite early strength, high yield bonds (HYG) slipped, which is generally a bad omen for risk assets. The S&P500 closed up +0.3%.
Wednesday, stocks were in full rally mode on the heels of strong earnings reactions, especially toward SpaceX (SPCX) which showed 830% Y-Y AI revenue growth from $813M to $7.56B primarily due to datacenter leasing to Anthropic. Late in the date, stocks fell back from the early highs as the US State Department sent a warning to some Middle East-based embassy personnel to evacuate due to expected rising hostilities in the region. The S&P500 closed up +0.6%.
Thursday all hell broke loose in the markets. Investors panicked after digesting CAPEX and debt burdens and future liabilities for SpaceX (SPCX) and Meta. In total, Meta, SpaceX, Oracle, Google, Microsoft and Amazon have accumulated debt, liabilities, and future liabilities of nearly $4.5 trillion plus another estimated but less certain $2.5 trillion from OpenAI and Anthropic. This is rapidly leading investors to an equation that equals a return-on-investment of sometime so far into the future that no one can tell anymore. Semiconductors (SMH) tumbled nearly -6% while the neocloud stocks fell even harder, some more than -10%. Investors rushed into bonds, pushing the 10Y US treasury yield below 5% for the first time in over a month. Investors also sought the safety of defensive sectors Consumer Staples (XLP) +3.3%, utilities (XLU) +2.1%, and healthcare +1.3%. Volatility was up ~14%, a sign that investors are showing real angst and uncertainly about what may lie ahead. The S&P500 fell -1.2%, the Russell 2000 actually gained +0.1% on the sharp decline in rates, however the NASDAQ 100 crashed nearly -2.9%. Thursday’s 10Y Treasury yield decline of 0.193 percentage point (to 4.952%) was the largest single day yield decline since March 10, 2023, which is the day Silicon Valley Bank failed.
On Friday, selling was broad-based but relatively mild. Energy shares (XLE) bucked the trend moving +2.6% higher as oil hit $103. Investors attempted to buy the dip in technology (XLK) pushing that sector up half a percent. All other sectors closed lower, most reversing gains from the prior day. The S&P500 fell -0.5%, the Russell 2000 -0.3% and the NASDAQ 100 closed flat.
For the week, both the S&P500 (SPY) and the NASDAQ 100 (QQQ) had modest losses, -0.47% and -0.79%, respectively. The Russell 2000 (IWM) actually posted a gain of +2%, mostly due to the dramatic drop in interest rates. Of note, all 3 indexes are down from where they were a month ago despite very strong earnings growth.
Warm wishes and until next week.