Housing & Commercial Real Estate Are Laying Out Some Stark Warnings

Forget About AI For A Moment

This week, investors got the news they were hoping for. June CPI came in lower than expected, both in headline and core inflation rates. Producer price inflation also cooled and is now sitting at just 0.1% year-over-year. The result from a market perspective is that stocks are having yet another big week. Tech and small-caps are outperforming. Long-term Treasuries are also up big on the expectation that the Fed might not have to tighten much more. All's right with the world again!

Except it isn’t. There are still too many weak corners of the economy to ignore the downside risks altogether. Yes, there are always going to be weak spots in any economy regardless of how strong it is, but the weakest spot in today’s global economy is a big one. The housing and commercial real estate markets are flashing some pretty big warning signs right now. Since my belief is that housing leads the markets and the economy (and it’s been proven by my research), this is a big vulnerability that could blow a hole in investor sentiment.

Let’s start with the housing market.

Whether you want to look at the Case Shiller Home Price Index or other comparable measures, one thing becomes very clear. The residential housing boom is over and annualized home price growth rates have come crashing back down to earth. The Shiller number has actually begun to signal deflation in housing.