Chart of the Day

Good morning!

If you find yourself praying for a recession so that you can finally buy a home, you’ll be in for a rude awakening. That’s because a very small and narrow cohort of buyers will be the only ones who emerge as homeowners in a recession. 

The idea is that when the economy slows down, some workers lose their jobs, which can help reduce competition in this limited housing supply era. The other part of it is that the Federal Reserve could also be inclined to lower interest rates, which can potentially bring down mortgage costs, making it cheaper to borrow money. 

But no two recessions are alike, nor do they guarantee that prices will fall off a cliff. 

Looking back at the past six recessions going back to 1980, home prices only fell during two — during the 1991 and the 2008 ones— according to research by Fundstrat Macro Data Scientist Max Motz. 

It’s also worth considering that a good chunk of younger prospective homebuyers don’t know how bad it can get during those times because we’ve never lived through a prolonged downturn, and the one in 2020 barely counts. That’s what happens when you’re blessed with an unusually exuberant bull run for the markets and economy since the financial crisis. 

Another obvious point is that you may end up losing your job, curtailing your financial ability to make an investment as significant as a home. The unemployment rate shoots up during slowdowns because businesses can’t afford to keep you on the payroll. For example, during the 1980-1982 recession, the rate moved as high as 11%.

Those of us delusional enough to think that we won’t lose our jobs will also be likely unable to purchase a home. When you see your colleagues and friends get laid off, how many of us will have the guts to put down tens of thousands of dollars in down payment and take out a 30-year mortgage. Sentiment matters there more than most realize. 

As it stands, 59% of those who do want to own a home but can’t, say that they don’t have enough income, 55% said that home prices are too high, and 46% said they can’t afford a down payment and closing costs, according to Bankrate’s 2025 Home Affordability Report.  

That means that the high home prices and limited supply issue — thanks to builders slowing down production after 2008 — will hardly be reset by a recession, even if borrowing costs do go down. 

Some might be realizing that right now. Perhaps that’s why pending home sales rose last month to a five-month high. Mortgage rates have declined in a meaningful way since August. 

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Q:  Have you invested in (or are you considering an investment in) non-U.S. AI companies?

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Catch up with Fundstrat

This week is a data heavy week, and we expect leans Fed dovish given the risk of economic disruption from a shutdown, and less inflation risk as well. But the bigger news might be this warning from AI researcher, who believes AI could be human-replacement jobs by next year. This would show AI is not a bubble, but the vast impacts are underestimated.

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