Da Bears -vs- Da Bulls

Shifts in the Beveridge Curve suggest a cooling labor market, which has important implications for real estate, especially in terms of home prices, mortgage demand, and rental markets.

Key Impacts on Real Estate:

1. Slower Wage Growth → Less Purchasing Power

• If job openings decline and unemployment rises, wage growth may slow, reducing affordability for potential homebuyers.

• Buyers may delay home purchases, leading to lower demand and price stabilization in some markets.

2. Mortgage Rates & Fed Policy → Potential Rate Cuts?

• A weaker labor market could prompt the Federal Reserve to cut interest rates to prevent a deeper economic slowdown.

• Lower rates could boost homebuying activity by making mortgages more affordable.

3. Impact on Home Prices → Market Shift from Sellers to Buyers?

• If job losses increase, more forced selling could lead to price corrections in overheated markets.

• More buyers may gain leverage in negotiations, shifting the market toward a buyer’s market.

4. Rental Market Dynamics → Possible Demand Surge

• If mortgage affordability remains an issue, more people may stay renters longer, increasing rental demand.

• This could keep rents elevated, especially in areas where homeownership is out of reach due to still-high borrowing costs.

Bottom Line:

• If the labor market cools gently, lower mortgage rates could spur homebuying.

• If unemployment rises too sharply, it may hurt real estate demand as consumer confidence weakens.

Watch for interest rate moves, wage trends, and job market deterioration—these will dictate whether real estate stabilizes or faces deeper corrections.

a BORROW SMART CONCEPT
What Goes Up, Must Come Down

If you invested $10,000 in an IRA in 1985, you’ve seen that grow to a cool $1 Million, but you took some heat along the way. To get that 12.6% annual return you had to leave it alone and HODL it … buying and selling often reduces your net returns with equities as retail investors tend to sell when equities are ‘on sale’ and buy when equities are ‘at highs’.

As you can see above, you lived through some 30%, 40%, and 50% drawdowns, which look like small blips when you zoom out, but I can remember those last two ‘blips’ in 2000 and 2008 like they were yesterday, and they were brutal to experience and in many ways behavior changing for many investors…

This is the reason we benchmark returns against a 30-year mortgage, as there has been no period of 30 years where markets weren’t positive, even the 1929 Great Depression. In most cases you are back to break even within 18-36 months.

Today the indexes are only about 10% from the high, but the typical stock is closer to 20% below its high… many of the tech stocks I watch closely are down 35% - putting them squarely in bear territory.

We went through this with real estate too, but only 4 times on record, and only one time that you could really feel in 2006-7. One reason is that the house isn’t liquid, and you live in that investment. That means when the house value is down, you don’t just sell it, you keep living in it, which means you HODL a lot longer and with leverage.

Assuming you bought a house with your $10,000 in 1985, (instead of an IRA) you could have bought an $85,000 house (the median average at the time) using that $10,000 as your downpayment, borrowing $75,000. That house is now worth a median of $419,200. That's not bad. Actually, that’s a 9% average return over that same time period, and you have to live your life in a house you own.

One Borrow Smart concept: how much wealth did you create in this example? Most consumers think $419,200 is their wealth, but the purchase price (downpayment and principal paid) was your money, so $419,200 future value of the house - $85,000 original price of the house = $334,200 in actual wealth. The real wealth calculation is more complex as you would back out house payment against what you paid in rent, plus add back tax savings and many other factors, but you get the idea!

PS - if you think I’m mistyping…

LIABILITIES
What’s Happening?

REAL ESTATE
What’s Happening?

Please don’t shoot the messenger, but this is the worst week over week shift in data I’ve seen using the same model. So focusing below on underlying dynamics that might be causing poor sentiment… when it shifts it will be massive, but remember everything compounds in one direction or another.

ASSETS
What’s Happening?

ON BEING HUMAN
What’s Worth Sharing?

DOPAMEMES
And Other Happy Moments…

AI
and The Future of Work…

Borrow Smart University || National Institute of Financial Education