Welcome back to Home Economics, a newsletter about the American housing market. This is The Week in Review, my weekly recap of macro and real estate news. Articles with a ◎ are free. Those with a ◉ have free previews but are only accessible in full for paying subscribers. Upgrade your subscription here:

After a few weeks of important macroeconomic data on employment and inflation, next week the calendar shifts towards real estate–specific releases.

• Zillow home prices: At the last reading, gains were just 3% y/y. I think these kinds of muted gains, if not even slightly lower, will continue. For one, incomes are the best predictor of home prices, and they are softening. Second, home prices are now very high versus incomes and rents. A period of consolidation is in order.

• Homebuilder sentiment: Builder confidence in the market for newly built single-family homes rose slightly at the last reading a month ago, breaking a string of four consecutive monthly declines.

• New residential home starts: At the last reading, starts jumped 9.6% on a monthly basis (an upside surprise), but the broader trend remains for slowing starts, especially in the multifamily sector.

Paying subscribers can download the housing economic data calendar (a Google calendar) here ◉.

News: Buyer sentiment inched higher but remains low
Views: I’m skeptical that this can continue

The HBSI inched up but remains at a low level. Overall, the index continues to paint a grim picture for homebuyers—the vast majority think it remains a poor time to buy a home, due to high mortgage rates and high prices. Sellers think it’s a relatively good time to sell.

I’m skeptical the index will improve much. For one, the next reading will reflect recently higher mortgage rates. Second, a high proportion of buyers are concerned about losing their jobs, and this is only likely to worsen from here. With prices still relatively high compared to other metrics of ‘normal’, this is not the environment in which buyer confidence improves meaningfully.

Reference:

What Determines Home Prices? Aziz Sunderji and Sarthak Vij · Aug 29 Read full story

News: Inflation rose more than expected, but rent came down sharply
Views: Inflation will continue its bumpy path lower

September core CPI rose 0.31% month over month, above expectations. But the contribution of housing was much lower: owners’ equivalent rent (OER) inflation slowed to 0.33% after last month’s 0.50% jump. Rents are finally coming down, pulling down rent inflation and the more important imputed cost of homeownership. To the extent that shelter costs have kept inflation high, this is reassuring: the broader trend is towards lower inflation over the coming months.

Ongoing tepid inflation readings should give us reassurance that inflation will not soon step back into the driver’s seat and motivate tighter Fed policy—and even higher mortgage rates—than would otherwise be the case.

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Hope you’re having a great weekend,