The cost to buy a house in America is now approaching $2,700/month vs cost to rent is $1,850. Biggest gap we’ve ever seen. Something has to break.

1) the easiest thing to "break" is Mortgage Rates going back down.

The next easiest thing to break is Home Prices coming down.

Likely some combination of the two will be required to save the US Housing Market from another massive collapse in buyer demand.

— Nick Gerli (@nickgerli1) May 22, 2023

3) In the end I don't think 7% mortgage rates will stay for long.

Because the housing market can't handle it. Transaction volume is already far too low.

If it goes down further, layoffs in associated industries like construction, manufacturing & retail will follow.

— Nick Gerli (@nickgerli1) May 22, 2023

4) The banking system might also have problems.

The last time mortgage rates hit 7% in early March, Silicon Valley Bank happened.

(There's still lots of unrealized losses on the books for banks, so these spikes in rates are very destabilizing to the banking system) pic.twitter.com/yj1qwf6qIC

— Nick Gerli (@nickgerli1) May 22, 2023

6) Rates are also going up just as bank lending is declining.

Take a look at Commercial & Industrial loan growth (loans to businesses).

Down from 15% to 7% growth YoY. And will likely keep falling.

Historically a big recession signal. pic.twitter.com/44cMAJAPmi

— Nick Gerli (@nickgerli1) May 22, 2023

7) So yeah – hard to see how see higher rates don't break the economy and housing market.

And eventually result in lower rates.

Check out the blog post I wrote on the Reventure App website for more analysis. Free to read and subscribe!https://t.co/41DQh8X4tF

— Nick Gerli (@nickgerli1) May 22, 2023

Greater Fool Theory Knows No Bounds pic.twitter.com/Gyxw0GfpDj

— Amy Nixon (@texasrunnerDFW) May 22, 2023

You can’t make this up:

1. Median Mortgage Payment: $2,800

2. Median Rent Price: $1,850

It now costs nearly $1,000/month more to buy a house than to rent.

Meanwhile, the average new car payment is now at $750/month.

The average interest rate on a used car loan just hit a…

— The Kobeissi Letter (@KobeissiLetter) May 22, 2023

The Middle Class Is Being Systematically Destroyed https://t.co/UShjyoTstb

— zerohedge (@zerohedge) May 22, 2023

60% of American adults don’t have a retirement-specific savings account such as a 401(k) or investment retirement account, also known as an IRA. That’s about 155.6 million adults.