Housing Market & Interest Rates - Lowering the Fed rate might help consumers buy homes by injecting liquidity into the market, but other factors complicate the situation [1] - Mortgage rates are based on the 10-year yield, not the Fed funds rate; rate cuts don't automatically translate to cheaper mortgages [2][3] - Last year, Fed rate cuts spurred expectations for growth and inflation, pushing up the 10-year yield and hurting housing [3] - The belief that Fed cuts automatically lead to cheaper mortgages is not universally held; while it often happens, it didn't last year [4] Inflation & Monetary Policy - Higher and stickier inflation changes how the 10-year yield reacts to policy changes; bonds may not behave the same way to Fed cuts as in the past 20 years due to a different inflationary environment [5][6] - Equities are potentially a better inflation hedge than bonds, questioning bonds' role as a diversifier [6] - The labor market is showing signs of softening, which could lead to the Fed cutting rates and potentially pulling down long-term yields and inflation [8][9] Labor Market & AI Impact - 34% of CEOs surveyed by the Conference Board expect job cuts in the next 12 months, the first time those expecting cuts outnumbered those expecting to hire since COVID [8] - Companies are expected to accelerate job cuts to control costs [9] - Companies are investing in AI and training their staffs, but the timing and degree of AI's disinflationary impact are uncertain [10][11] - Companies are pressured to invest in AI, which requires upfront spending and may lead to headcount reductions to offset costs [11][12]

Housing Market Data - July housing starts significantly stronger at 1428000, a jump from the previous month's 1321000 [2] - July housing starts mark the second strongest pace of the year, reaching levels last seen in February [3] - July permits are slightly light at 1354000, following 1393000 the previous month [3] - Single-family inventory levels are relatively high, potentially leading to a shift towards multifamily construction [4] Interest Rates and Market Outlook - Mortgage rates briefly moved down into the 660s, considered high compared to the last 10 years [5] - The 10-year Treasury yield is hovering around 432, down one basis point from the previous day's close [5] - The 2-year Treasury yield is around 375, down a couple of basis points [6] - Market anticipates potential rate cut at the September meeting, but the Fed may not want to disappoint the market [6]

Market Overview & Trends - Home Depot's sales momentum is lacking due to less accommodative interest rates, impacting the home improvement channel [2][3] - Summer-like weather helped Home Depot's sales growth slightly during the fiscal quarter [4] - Delays in large renovations are observed, with expectations of lower rates as a trigger for project commencement [9] - A 5% handle on the 30-year fixed mortgage rate could unlock significant remodeling demand [11] Company Performance & Strategy - Home Depot is managing wealth and is a well-run company in a solid sector, but lacks sales momentum [2] - Home Depot benefits from pent-up demand in the US housing market, which is expected to resurge as rates move lower [7] - Home Depot is making better and bigger moves in the complex pro business [15] Investment Recommendation & Valuation - Oppenheimer views Lowe's as a better investment play due to more operational slack and a wider valuation gap compared to Home Depot [13][15] - Lowe's operations are now very close to Home Depot's, but there's still a little more slack there [14] - Despite improvements at Lowe's, the valuation gap between Lowe's and Home Depot has remained very wide, making Lowe's cheap [15] Interest Rate Impact - Lower mortgage rates are expected to re-accelerate sales at Home Depot [7] - A move towards a 5% handle on the 30-year fixed mortgage rate is anticipated to unlock remodeling demand [11] - Lower HELOC (Home Equity Line of Credit) rates, influenced by Fed moves, could fuel remodeling demand by allowing homeowners to tap into historic equity [12]

Buy Now Pay Later (BNPL) Market Analysis - US e-commerce is a \$1 trillion business, with BNPL currently pushing \$70-80 billion, representing a small fraction of the overall US retail market, which is about \$7-8 trillion [5] - BNPL is misunderstood to be steered towards people without access to banking, but it's skewed younger, particularly the 18-34 cohort, who may not trust credit cards or banks [5][6][7] - BNPL's counter-cyclical potential lies in helping e-commerce retailers convert sales that regular credit/debit cards might not, potentially thriving in a weaker economy [8][9][10] - BNPL growth primarily impacts banks, as they are the current credit card operators, while Visa and Mastercard benefit from increased transaction volume due to installment payments [11][12][13] Company Specific Analysis - Affirm is considered a buy due to its unlimited TAM (Total Addressable Market) and strong execution, differentiating itself from Klarna by offering a wider range of products, including interest-bearing loans [13][14][15][16] - PayPal is also a buy, with BNPL being a key part of its new branded checkout button, expecting BNPL to grow in the 40s over the next 2-3 years, accelerating branded checkout button growth, and gaining market share in Europe [17][18][19] - Circle is rated as underperform due to flat USDC distribution at \$68 billion since April, increasing distribution costs, and potential revenue shortfall [20][21][22][23] Housing Market Analysis - Home builder sentiment has fallen to its lowest level since 2022 due to persistently high mortgage rates constricting the market [3][41] - Mortgage rates need to be closer to 6% than 7% to loosen up the market, but consistency in rates is lacking, making borrowers cautious [43][44] - The Fed cutting rates would signal to banks to cut construction lending rates, boosting production, but the Fed's primary focus is on inflation and the labor market, not directly on housing [46][47][48] - Tariffs have been priced in, with about 60% of builders reporting increased goods costs, but the impact hasn't been as significant as initially anticipated due to slowed construction pace [52][53][54][55]

Builder sentiment in the single family housing market dropped one point to 32 in August on the NAHB index. The street was looking for a onepoint gain. Anything below 50 is considered negative.Last August it stood at 39. Now the builders pointed to elevated mortgage rates, weak buyer traffic, and ongoing supply side challenges. Mortgage rates though actually came down nearly a quarter point from the end of July to the first few weeks of August.But that clearly didn't help much. Now, of the index's three comp ...

Housing Affordability - US homes cost 750% of annual household income [1] - Housing affordability is worse than the 2006 housing bubble peak [1] - High mortgage rates of 660% exacerbate affordability issues [1] Economic Implications - Continued unaffordability threatens the middle class [1]

Home builders sentiment pulling back in August as elevated mortgage rates, weak buyer traffic, ongoing supply side challenges, all weighing on the market. This comes as Warren Buffett's Bergkshire Hathaway increased its exposure to the sector last week. It did add shares of LAR.It initiated a stake as well in Dr. . Horton. Wed Bush analyst Jay McCandal joins us now.He's got his outlook for the sector. We also got some sentiment numbers at the top of the hour. Jay, despite what was a fall in mortgage rates, ...

But first, breaking housing data just crossing. Diana Olic has that for us. Diana, that's right, Leslie.Builder sentiment in the single family housing market dropped one point to 32 in August on the NAHB index. The street was looking for a onepoint gain. Anything below 50 is considered negative.Last August, it stood at 39. Now, the builders pointed to elevated mortgage rates, weak buyer traffic, and ongoing supply side challenges. Mortgage rates though actually came down nearly a quarter point from the end ...

US homebuilder confidence fell this month to match the lowest level since 2022, forcing firms to lean more heavily on incentives to counter high mortgage rates and persuade unmotivated buyers https://t.co/EVAOOcbZLx ...

Mortgage Rates and Market Trends - US mortgage rates experienced the most significant weekly drop since February, with the 15-year mortgage rate falling below 6% for the first time in four months, matching its lowest level since October [1] - Despite lower mortgage rates, the industry has not observed a corresponding increase in purchase applications, although refinance activity has seen a notable uptick [3] - Realtor.com data indicates rental market softening with 24 consecutive months of rent decreases, showing a 2.7% year-over-year decline in asking rents as of July [9] Shelter Inflation and Affordability - Shelter costs continue to decelerate, but still outpace overall inflation [1] - Shelter inflation remains persistent due to the significant rent increases during the pandemic, with current rents catching up to those increases [8] - A Yahoo Finance poll indicates that most people feel the housing market is out of reach at current prices, with home prices up 15% to 50% from pre-pandemic levels in some metro areas [12] Housing Market Dynamics - Home ownership rates have softened due to high costs, particularly impacting younger households who are more flexible between renting and owning [14][16] - In many major metropolitan areas, renting is currently more financially advantageous than buying when considering simple monthly costs [17] - Slowdown in multi-family permitting activity in some metro areas like Philadelphia, Orlando and San Diego suggests builders are reacting to market conditions and potential impacts of tariffs [20]