Stocks are lower this morning as negotiations with Iran in Switzerland get off to a rocky start. Bonds and MBS are down. Iran has closed the Strait of Hormuz after fighting in Lebanon continues. The situation remains fluid however.
This week will be dominated by the Personal Incomes and Outlays report, which will contain the PCE Price Index – the Fed’s preferred measure of inflation. We will also get new home sales and consumer sentiment. We will also hear from Austan Goolsbee and John Williams. Homebuilder KB Home will report earnings as well.
The Index of Leading Economic Indicators improved in May, according to the Conference Board. As has been the case for the past few months, the big drivers of the increase have been financial indicators – things like the S&P 500 and bond yields. The biggest negative has been consumer expectations. Most of the hard economic indicators were more or less flat.
“The Leading Index for the US increased slightly in May, fueled entirely by positive contributions from financial components, especially stock prices and the interest rate spread,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “On the non-financial side of the LEI, only ISM® New Orders Index showed some strength, with consumer expectations remaining a major drag. Despite two consecutive monthly increases, the LEI’s six- and twelve-month growth rates were still negative, suggesting slower economic expansion ahead. Consumers are feeling squeezed because everyday costs—especially gas and energy—are rising faster than their incomes, leaving many households with less money available for things like travel, restaurants, entertainment, and shopping. The good news is that businesses are spending heavily on AI, data centers, and new technology, helping to keep the economy growing, while consumers pull back spending. The overall job market is expected to stay fairly healthy in 2026, but economic growth will be weaker than in recent years. The Conference Board is currently projecting 1.8% y/y GDP growth in 2026, down from 2.1% in 2025.”
Homeownership affordability is more than just mortgage rates and home prices. Things like insurance, taxes, HOA fees and maintenance also account for an increasing portion of the monthly payment. These ancillary pieces have been increasing faster than P&I payments for years. HOA fees overall have increased 85% since 2019. Homeowner’s insurance fees are up 72% over the same period.
The total annual bill for homeownership has increased 39% over this period from $20,618 to $28,596. Over the same period, the CPI is up 26%.
