Housing Market Squeezed as Price Growth Slows

0:00We got some fresh housing data for you and we are talking about the case Schiller numbers and FHFA numbers hitting the tape today. We did see here the case Schiller 0.2% year of year of 1.2% Mark Vittner Chief Economist at Piedmont Crescent Capital and also Yelena Shalutteba is with us Senior U.S. Economist for the conference board Yelena why don't we start with you what did you make of some of the prints that we saw today? Well housing prices are still rising even though they are rising in a slower pace but overall we expect housing and the residential investment to contribute negatively to GDP growth this year. High inflation will make things worse unfortunately and given what is going on in terms of geopolitical developments I think it's it is important to remember that consumers have a limited number of dollars they can spend and if some of it is diverted into

1:07higher gasoline prices right they have to buy more expensive gasoline that they will have less money to spend on other things and that will impact housing another thing is that interest rates rising and they're rising because of long term interest rates are rising because of inflation worries so that will also impact housing affordability in a negative way and look I mean that's sort of right that's what's obviously going to happen if people are pinched at the pump they're going to have to sort of reallocate how they spend and we've been getting in some consumer numbers as well Mark how are you feeling about the consumer? Well that's a little bit of a vice the housing data actually came in a little bit better than expected today we had been seeing outright price declines on a monthly basis and what we've seen is prices

2:07affirmed for not necessarily a great reason but fewer people are putting their homes on the market that's one of the reasons that prices came in a little bit better but right now home prices are rising less rapidly than inflation which means housing's becoming a little bit more affordable but on the other side the consumers getting squeezed by higher gasoline prices and with job growth slowing folks are really hunkering down right now they're not out there making a lot of discretionary purchases or big purchases are locking themselves into a specific geography if they're worried about their job so people have kind of backed away from from buying a home right now they're waiting to see how things settle out with with Iran and and hopefully we see a reversal of of this big spike in energy prices that we see everybody's waiting for the spring selling season mortgage apps and things like that to improve and while we've had more inventory on the market that has been some good news you you do see the price is still higher right and as you said

3:11they're a little better I get what you're saying it's um you know at a slower pace but affordability is an issue when does housing become great again Alina? Well I think that a lot will depend not just on the prices but also interest rates and household incomes and unfortunately on the you know on the incomes side things are not really looking good so we have seen the deceleration in disposable personal income growth even before the war started and now I think that if you continue to adjust personal income by inflation and taxes that will not look pretty so I think that consumers has squeezed we see that in our consumer confidence survey at the conference board despite a little bit of an uptick in consumer confidence index we see in other indicators in the survey that consumers have very much

4:15concerned about high inflation inflation expectations spiked in the survey consumers right in responses are telling us that they are very much concerned about oil and gasoline prices the number of mentions of the conflict and the war spiked and buying plans mark talk about buying plans earlier buying plans for goods and services actually shifted from yes and maybe in the February survey into something like no in the March survey so consumers are planning less on buying more goods and services going forward and which are you worried more about mark is it inflation or labor quickly I'm worried more about labor I'm I'm thinking that the problems that we're going to see on inflation are pretty temporary and as long as the Fed doesn't accommodate to run up an energy prices by by easing policy to aggressively

5:18then we should move past it fairly quickly but the labor market is really weakening and we we're seeing very very little job growth and and and I'm worried that that could could gain some momentum to the downside yeah by the way with Oracle layoffs that I mentioned earlier 30,000 jobs massive layoffs heavy AI investment the stocks at new new session high today up 5.8% for Oracle mark Vittner and Elena Shulatyeva thank you both so much it's wonderful to see both you