Housing data!
The housing market is still locked up and I’m still on the side that if this gets rolling again, it helps lower the OER/Rent components of the CPI, and lower the inflation print. This mechanism is indirect through via reducing rental demand and not through lowering the cost of mortgage interest, which actually has the opposite risk of inflating home prices. Whilst shelter is the largest component of the CPI data, the index does not include the price of buying a house or the cost of mortgage interest.
A. Direct Impact on Home Prices (Not in CPI)
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Lower Mortgage Rates: Stimulate buyer demand, which typically drives up home purchase prices.
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Home Prices and Mortgage Interest: These are generally excluded from the main CPI measure because they are considered asset prices and investment costs, not consumption costs. (The costs of services like repairs and maintenance are included, but not the asset price itself.)
B. Indirect Impact on Rents (The CPI Component)
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Lower Rates Drive Higher Demand for Buying: When it becomes more affordable to buy (due to lower mortgage payments), some people move from the rental market to the purchase market.
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Lower Rental Demand Drive Lower Rent Inflation: This reduced demand for rentals ultimately leads to lower rent increases for the remaining tenant population.
Conclusion: Rate cuts primarily affect the monthly cost of owning (which is not in the CPI) and, by making homeownership more attractive, reduce demand in the rental market, which eventually helps lower the OER/Rent components of the CPI. There can be substantial lag in this area and we have seen it dropping lately.
https://truflation.com/marketplace/us-inflation-rateJobs data!
More importantly, the ADP number is dovish, meaning it strongly increases the likelihood of a Federal Reserve (Fed) rate cut, which now sits at 88%. Probably the data point most people will want to talk about today.
https://tradingeconomics.com/united-states/adp-employment-changeIt is the biggest decline in payrolls since March 2023, led by a 120K drop at small establishments, which offsets gains in medium and large business’s. So really the data is just saying what we all know, small business’s are really struggling here. The debt pay wall in 2026 will likely only increase this pain point, as this sector has the least flexibility when it comes to managing their debt burdens.
Side note:
I did not make a monthly deposit this month. With the broad market pushing higher I didn’t feel the need. Overall I’m really happy with my position weightings and risk profile for right now, but also a little selfishly…. I booked myself a few holidays. I know PI’s on here talk about making sure to add money monthly and prepare for your future, and whilst I agree with that, i also think money should be. 2025 was a rough year for me with losing some close family and my view of money has shifted a little. I still invest a massive part of my wealth and I don’t plan on withdrawing any funds, but i think the ultimate currency is time. Make memories you can treasure, don’t wait till your 70’s. 🤗
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@JodySlaney with CISI Lvl 3 Wealth & Investment Management
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The views expressed above are my personal opinion and do not constitute investment or financial advice. Please remember that your capital is at risk, and past performance is not a reliable indicator of future results.