U.S. Housing Market Split & Hasbro's Magic Quarter

John Crotteau (0:01)

The housing market is getting so crazy, even luxury real estate brokers are shocked.

Emily Milliron (0:05)

And can the kiddo economy keep growing up? We've got Hasbro's latest numbers.

John Crotteau (0:10)

For Tuesday, October 20th, it's Brew Markets Daily. I'm John Crotteau.

Emily Milliron (0:13)

And I'm Emily Milliron. Let's get movin and groovin.

John Crotteau (0:23)

All right, Emily, it is great to have you in the studio again today. In a moment, we're gonna get into 3M, adding two more initials, AI, of course. Plus, the NBA season kicks off tonight. We're gonna find out if you are investing in the New York Knickerbockers.

Emily Milliron (0:38)

We'll see.

John Crotteau (0:39)

But first, what do you wanna kick the show off with?

Emily Milliron (0:42)

Yeah, John, for our first story today, I wanna talk about housing. There's a ton going on. We've touched on it a number of times before, but I found some through lines in what I thought were really interesting and put in the context of the economy at large. So let me start by asking you, do you know what the NAHB Wells Fargo Housing Market Index is?

John Crotteau (1:02)

Okay, I don't generally. I know that NAHB is probably the National Association of Home Builders, so I'm gonna guess this is something around sentiment, broadly.

Emily Milliron (1:10)

Essentially. It's a monthly survey of home builders that gauges how confident they are about the single-family housing market, and the National Association of Home Builders has run it since 1985, and Wells Fargo sponsors it, so that's where that comes in. But here's exactly how it works. Builders rate three things. Current sales of single-family homes, expected sales over the next six months, and the traffic of prospective buyers in their sales offices. So it's just like a big picture. Each component is converted to a to 100 score, seasonally adjusted, and then combined into one headline number. So 50 is really the sweet spot. It's the dividing line. Above 50, more builders see conditions as good than poor, below 50, obviously the reverse. So some new numbers came out on Monday. They made news. If 50 is the dividing line, where do you think the current housing market scored?

John Crotteau (2:02)

All right. Well, on rates alone, I have to imagine it's below 50 So I'm just going to go 49

Emily Milliron (2:07)

Very conservative answer. But the reason it made headlines is because it dropped to 29 29 29 It's the lowest. It's been in almost 15 years. And I'm talking June of 2012 So, John, give us a little context as to why that is.

John Crotteau (2:20)

All right. Well, of course, the Middle Eastern energy crisis sent manufacturing and shipping goods soaring. And it set off inflation fears and a mass bond sell-off and made buying a home wildly expensive. Mortgage rates are well over 7 percent, and materials cost more. Construction loans are pricier. It kind of touches every single aspect.

Emily Milliron (2:40)

It really does.

John Crotteau (2:41)

And so buyers are thinking, it's not the right time to take out a home loan at 7 percent. And then builders hit pause, it trickles down, and then impacts millions of jobs, architects, engineers, real estate agents, skilled trade laborers.

I saw, in fact, a stat this week that all those components, everything related to the housing sector, touches about 15 to 18 percent of our country's total GDP. So that's why we're talking about it.

Emily Milliron (3:06)

Yeah, it's a massive part of our economy. And what's going on right now, it's a total domino effect. Selfishly, I would love to buy a home in the next few years. So I'm paying close attention. I'm on Zillow. I'm looking at what property rates are. And this stuff isn't just industry talk, you know. It is tangible to all of us in different ways. And while this particular report made headlines over the last 48 hours, there were other articles out there that told the story of the other side of the housing market that was just completely different.

John Crotteau (3:31)

Right. We're talking about the luxury side of the housing market. And we saw this in the Wall Street Journal. You and I were talking about it this morning. Here's a quote. America's new housing market is all about luxury and it runs on cash. Surging mortgage rates are sending many buyers to the sidelines, while affluent shoppers are driving overall prices higher with big cash purchases. And according to data from the First American Data and Analytics in 33 of the top 50 metro areas, luxury home prices are rising faster than starter home prices.