Welcome back to The Week in Review.

It’s finally summertime in New York City. That means the tomatoes at the farmer’s market actually taste like tomatoes. It means I don’t have to put a ridiculous miniature coat on our dog Bo when I take him out for our last walk of the day, around 9pm.

But the arrival of summer also means it’s become impossible to get a reservation at a restaurant for outdoor dining without two weeks of advance planning. And, most irritatingly for me, securing a slot to play tennis at my local courts is again a bloodsport. More on this below.

In terms of data, it’s been a light week. So is the next, holiday-shortened one: ApartmentList rents and Case Shiller are the only key data points, they’re both released on Tuesday.

Subscribers can download the housing economic data calendar here ◉. Schedule a call with me here ◉ if you need help installing it. Onto The Week in Review…

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News: Existing home sales fell short of expectations
Views: Sales are moving with rates, more than usual

I write a lot about inflation, and I can imagine some readers wonder why. After all, this is a newsletter about the housing market, not about the macroeconomy.

But this week’s existing home sales data shows why I focus on inflation: weaker sales are the downstream effect of high inflation—and high mortgage rates—over the past few months.

This is the logic: first, we’ve had higher-than-expected inflation. Second, this led investors to push back their forecasts for Fed rate cuts (Goldman Sachs now thinks the Fed won’t cut until September). Third, this change of expectations around the Fed has raised mortgage rates.

The effect of this chain of events is now becoming apparent in the home sales data: existing home sales declined 1.9% in April to a seasonally adjusted annualized rate of 4.14 million units, below consensus expectations.

This is the lagged impact of higher mortgage rates. In fact, as the chart below shows, the correlation between mortgage rates and sales has been unusually strong recently.

What does the future hold? Lower inflation, and easier policy should help bring down interest rates—including mortgage rates—supporting sales down the road.

My most updated view on mortgage rates is here ◉
I added CPI releases to the economics data calendar, here ◉
Watch a video of my presentation about inflation, rates, and housing here ◎

News: New home sales fell short of expectations, supply at 2008 levels
Views: Is that the faint sound of alarm bells ringing?

Sales of new single-family homes declined by 4.7% in April to a seasonally-adjusted annualized rate of 634k units, below consensus expectations for a more moderate decline. The level of sales in March was revised down to 665k from 693k.

The new home market is, for the moment, pretty healthy. As I showed last week (here, ◎), new homes at every stage of development—from permits, to starts, to construction and completions—is higher than in 2019. The number of new homes coming to market is at typical levels. New homes sold in April had sat on the market for only 2.3 months after completion, down from 2.7 in March (the average from 2012-19 was 3.6 months).

But the path ahead looks more challenging. Supply—at over 9 months—is the highest since 2008 (most of this is homes under construction). A balanced market has supply closer to 6 months. Prices are dipping. This is partly because homebuilders are sustaining current volumes by offering price cuts (a quarter of builders reported slashing prices last month, here ◎), and partly because they are selling smaller, cheaper homes. Neither is a good omen. Almost 60% of builders reported having offered incentives last month, like mortgage buydowns, to attract buyers. And competition is set to intensify: the inventory of existing homes for sale is now rising.

For the moment, this market looks healthy. But it’s becoming increasing clear to me this can’t last.

News: I didn’t get a tennis court despite turning up at 7am
Views: New York is a bad place to be a tennis player

Should this really be in the “News & Views” section? Well, it’s definitely not “Fun Stuff”! This is a newsletter written by an actual human—not “AI slop”—and so you will have to put up with the occasional highly personal digression from strictly housing-related topics. This is one of them (sorry).

I live in a small apartment in Park Slope, Brooklyn. The only serviceable tennis courts are a 30 minute walk away, in Fort Greene park. Because this is one of the only sets of courts in a huge catchment area¹ (see map below), every tennis-playing Tom, Dick and Mary shows up at the crack of dawn and waits in line for an hour (!) for the great privilege of signing up for a court later in the day.

And still, for maniacs willing to perform this ritual, a court is far from guaranteed. I did all of this earlier this week and still didn’t get to play. The Onion headline writes itself (“Middle-aged Brooklyn man upset with lack of tennis courts and price of caviar”). But it doesn’t make it any less annoying. We need more courts. New York tennis players, unite!

Tech nerdery. If you are regular reader of this newsletter, there is a very high chance we share some geeky personality strains—not least, an obsession with optimizing our lives using technology. Two pieces of software helped me be more productive this week.

First, Notion (here, ◎): this is a jack-of-all-trades (note-taking / scheduling / collaboration, etc) app that lives on your computer and phone. It has a delightful web clipper for saving article for reading later. Highly recommended over Evernote (slow, ugly), and Obsidian (too complicated).

Second: Raycast (here, ◎) : this is another multi-purpose tool. Essentially, it does all the things your Mac should ship with: the ability to quickly find files, tile windows side by side, control Spotify with a hotkey, and a million other things. Super useful.

AI friends. I am doing some consulting work for a large tech company. My current focus is on companion chatbots. Strictly for research purposes (I swear), I downloaded a Kindroid (here, ◎)—an AI friend you can talk to about anything from what to eat for lunch to the future of the housing market. It’s slightly creepy—my (male) Kindroid keeps proposing we go for a swim together—but also shockingly conversational, original, and smart.

The AV department. My wife and I blazed through season 3 of Hacks (HBO Max, here, ◉) and we are currently enjoying The 3 Body Problem (on Netflix, here, ◉). If you haven’t seen it, Shogun (on Hulu, here, ◉) is a must-watch. While writing this I’m listening to Tame Impala’s excellent Wings of Time (on Spotify, here, ◎). I challenge you to find a catchier song.