Hope For Housing In 2025?

🏡 Buying a house is a misery only a Greek tragedy can encompass. But it’s time to get hyped because, according to the people who sell houses for a living, there will be more home sales in 2025. Find out why—and where—below.

January 30, 2025

Silver banana goes to…

In this issue of the peel:

  • 🏡 Buying a house is a misery only a Greek tragedy can encompass. But it’s time to get hyped because, according to the people who sell houses for a living, there will be more home sales in 2025. Find out why—and where—below.

  • 🍝 Goes without saying, but Chili’s crushed last quarter, sending parent company Brinker International on a rip. Starbucks rose despite pretty weak earnings, while Victoria’s Secret fell despite expecting good earnings. CrowdStrike continues to wobble post-DeepSeek.

  • 📉 No rate cuts today. The Fed held interest rates and all other monetary policy steady on Wednesday, a surprise to… literally no one.

Market Snapshot

Banana Bits

BOXABL Announces New $20,000 House

When the biggest names in your industry take an interest, you know you're onto something.

That's the story with BOXABL. They've rethought housing by bringing assembly lines to new home construction. Not to mention, the company has gained the attention of investors like D.R. Horton. Where traditional homes take over 7 months to build, BOXABL factories can produce their signature Casita home in nearly four hours.

And they’re just getting started. BOXABL just announced a new $20,000 house called Baby Box. It’s a turnkey home designed for affordability, flexibility, and versatility. Perfect for disaster relief, workforce accommodations, community projects, or you just need extra space, the Baby Box is another great solution added to their product line.

Now, everyday investors can join them too. When BOXABL last opened a Reg A investment opportunity, they maxed out the $75M regulatory limit, and they believe their new $20,000 house is the key to unlocking even greater potential. Become an investor today.

*This is a paid advertisement for Boxabl’s Regulation A offering. Please read the offering circular here.

Reservations represents a non-binding indication of interest to purchase as Casita. A reservation does not require purchase of a Casita and there is no assurance of how many will result in actual purchases.

Macro Monkey Says

Sisyphus’ Housing Market

Camus said that we have to imagine Sisyphus was happy.

That’s pretty easy to do, considering crybaby Sisyphus over here never had to make a Hinge profile, fill out a FAFSA form, or announce how “humbled and honored” he was to accept an underpaid job that inevitably won’t match the description.

Sisyphus also never had to endure the modern, long-form torture technique of buying a house. But, this year, prospective homebuyers in some cities can expect a slight reduction in excruciation.

Let’s get into it.

What Happened?

Breaking news emerged yesterday when the Case-Shiller Index promptly reported a nationwide average home price increase of 3.8% YoY as of 3-months ago.

Super helpful guys, thanks.

The one interesting piece of data in this report was that, after adjusting for inflation, home prices are effectively flat YoY and are actually 1.1% below the peak in real house prices reached in 2022.

Certain parts of the country, meanwhile, are relying on more than just the destruction of purchasing power to hopefully afford homes.

Earlier this month, the National Association of Realtors (NAR) dropped this report, sizing up 2024’s housing market and giving an outlook for 2025.

Here’s the TLDR for 2024: sh*t was f*cked. 2025 gets a little more complicated. 

The NAR expects small but homebuyer-favorable changes in housing market conditions, including 6.3% growth in starts on new housing units, flat home prices (i.e., declines in real home prices), and, most notably, a decline in mortgage rates.

Right now, the average 30-year fixed mortgage rate in the U.S. is sitting just below 7%. According to the NAR, under the prevailing median sales price of $407,500, a drop to 6.5% would bring the qualifying income needed to afford the median U.S. home below the median household income.

If they fell all the way to 6%, the NAR expects that 6.2mn additional households will be able to afford the median home. For residents of the cities shown below, that number could grow even larger:

According to the NAR, these 10 cities will be the hottest of the hot spots in the U.S. housing market this year. These markets include:

  • Boston-Cambridge-Newton, MA

  • Charlotte-Concord-Gastonia, NC-SC

  • Grand Rapids-Kentwood, MI

  • Greenville-Anderson, SC

  • Hartford-East-Hartford-Middletown, CT

  • Indianapolis-Carmel-Anderson, IN

  • Kansas City, MO-KS

  • Knoxville, TN

  • Phoenix-Mesa-Chandler, AZ

  • San Antonio-New Braufels, TX

10 criteria were used to compile this list, and there must’ve been something special thrown in there because who the hell is actively trying to move to Hartford, CT?

One of the reasons Hartford made it onto the list is because that region and the Greater Boston area are the only two regions on that list where the average homeowners has lived in their current house for longer than that of the full U.S. average.

That means they may want to move out sooner. Unlike Hartford, cities including Boston, Grand Rapids, Kansas City, Knoxville, and Indianapolis boast prevailing rates supportive of expectations for higher housing turnover.

Those 5 cities all have an “average share of mortgage originations done at 6% or below” above that of the rest of the country. In fact, Boston and Kansas City go even further, boasting prevailing mortgage rates below that of the U.S. average.

Those factors, along with strong job growth, a high proportion of citizens at or near their peak homebuying years, and a higher share of starter homes, are how a region like Boston—with median home values north of $900k—can end up on the NAR’s list.

Prices and mortgages aren’t the only factors that matter. When analyzing the housing market on a national level, those are the only primary factors you’d check. But, given that housing is local by nature, infinite other factors come into play for every buy (or not-to-buy) decision.

The Takeaway?

Building off the NAR’s data and assuming a 1.5% property tax rate, 20% downpayment, and a ~$2,200 annual home insurance cost, we can see a linear relationship form between mortgage rates and the number of marginal buyers entering the market.

For every 0.1% decline in prevailing mortgage rates, an estimated ~1.67mn prospective homebuyers enter the market.

With regional dynamics like those listed above and spelled out in further detail in the NAR’s report, those cities can expect an even stronger uptick in demand.

Unfortunately, that uptick in demand could kill itself by pushing prices too high, taking what would have been marginal buyers out of the market.

Once again, the problem remains the same. The U.S. needs more homes. But unfortunately for us, and unlike the homie Sisyphus, homebuilders apparently don’t see a point in doing their job.

Lastly, keep in mind—the NAR is a bunch of realtors… people who sell houses for a living. Do you think they’re incentivized to tell you there will be more or fewer home sales in any given year? Exactly… big grain of salt.

Career Corner

Question

I had a networking call last week with two vice presidents at a bank where I brought up a program I've applied for.

During our discussions, they said they would push my application. I want to follow up to inquire if they had the chance to push my resume through. What is an appropriate message to follow up and ask if they have pushed me through?

Answer

I would email each of them individually (this way they will see it as them being responsible), but give a few days between each

You can simply say

"Hi [name]—thanks again for the call last week, I really appreciated the insight you gave to me on X program and I'm excited about continuing the process.

Do you have any knowledge on timing for next steps?

Best Regards,

[Name]"

Head Mentor, WSO Academy

What's Ripe

Brinker International (EAT) 16.3%

  • Brinker shares were about as subdued on Wednesday as your average Italian family is quiet. The parent to of two of America’s crown jewels, Maggiano’s and Chili’s, crushed Q4 earnings.

  • Brinker reported a quadrupling of net income to $2.61/sh on sales of $1.35bn, up from $1.06bn last year. Both beat estimates thanks to strong comparable sales.

  • Specifically, strong comps at Chili’s. This brand saw a same-store sales boom of 31% YoY, while Maggiano’s grew just 1.8%. Visitors to Chili’s grew 19.9%, and I’m just surprised it wasn’t higher.

Starbucks (SBUX) 8.1%

  • Apparently Starbucks still makes coffee—they don’t just go on strike like I was starting to think. And when they’re not on strike, their earnings are almost as good as their coffee.

  • Reporting a very nice $0.69/sh in earnings on $9.4bn in revenue, Starbucks beat estimates for $0.67/sh on $9.31bn. Total sales were flat, comparable sales were down 4%, and foot traffic fell 6%. 

  • U.S. customer traffic fell 8% as new CEO Brian Niccol is trying to “bring back Starbucks” with a focus on high-quality products and a good customer experience.

  • Shares rose as markets were anticipating even worse results, including a 5.5% comp sales decline. A 40% reduction in discounted transactions boosted revenue.

What's Rotten

Victoria’s Secret (VSCO) 4.6%

  • Imagine you’re hiring a Chief Compliance Officer, and you choose to bring on Bernie Madoff. That’s effectively what Victoria’s Secret just did with its CFO.

  • It was a solid update otherwise, including raising the lower end of Q4 guidance. Sales growth is expected to be 3-4% from 2-4% while their EPS range narrowed from $2.00-$2.30/sh to $2.20-$2.30/sh.

  • But, the women’s underwear maker decided to bring on Scott Sekella as their new CFO. Sekella’s last role was CFO of Joann, a company that declared bankruptcy in March of last year. He then left the firm in July.

CrowdStrike (CRWD) 2.8%

  • The great thing about being a cybersecurity company is that when one firm f*cks up, all the others benefit. The cyberattacks that hit DeepSeek earlier this week sent U.S. cyber stocks soaring.

  • Then, Wednesday happened. CrowdStrike shares pulled back as markets try to parse what’s true and false and who f*cking knows about the whole DeepSeek thing.

  • Nvidia looked similar, down 4.59% after rising 8.62% on Tuesday. Expect volatility to continue until anyone knows anything about how Deep to Seek.

Thought Banana

No Hurry

Wow, a boring Fed Meeting? That can’t be possible—next, you’re gonna tell me water is wet, and bankers love to golf.

JPow’s press conference was so boring I turned my laptop off, went outside, and watched grass grow for the rest of the conference. How’s that for an exciting intro?

Let’s dive in.

What Happened?

Yesterday, the policy-setting arm of the Federal Reserve, the Federal Open Market Committee (FOMC), met for the first time in 2025 to discuss changes to monetary policy.

The only thing was… there was zilch to discuss. The Fed held interest rates in their current range of 4.25-4.50%, a full percentage point lower from the peak reached between July 2023 and September 2024. No changes were made to the Fed’s balance sheet.

The decision to hold rates steady would be notable, given that this is following three consecutive decisions to cut, if everyone didn’t already see it coming.

Treasury markets barely noticed while equities waited all day with bated breath for the afternoon’s earnings reports from Microsoft, Meta, Tesla, and others. 

The biggest takeaway was when Fed Chair Jerome “JPow” Powell said that with rates now “significantly less restrictive” than the same time last year, the Fed “do[es] not need to be in a hurry to adjust our policy stance.

Basically, Powell’s gonna sit back and let the pending macro data do the talking for him.

The other notable aspect of yesterday’s meeting was that it was JPow’s first time being back in the hot seat under a Trump presidency.

The President has—in his first term and in the last week-and-a-half—voiced strong opinions on 1) simply lowering rates and 2) letting the President have more control over the actions of the Central Bank. With Powell in charge, that seems to be of little concern. 

When asked to respond to the President’s comments on the subject, JPow kept it simple, saying, “As I’ve said countless times over the years, this is who we are, this is what we do… Don’t look for us to do anything else.”

The Takeaway?

If it ain’t broke…

The effects of cumulative inflation in the post-pandemic era are still being felt (or at least complained about) widely. Despite that pain, every metric in the U.S. economy—from wage growth to the Men’s Underwear Index—is firing on all cylinders (except housing).

As long as the economy is working and surprises continue to be favorable, don’t expect many changes anytime soon.

In fact—traders (or maybe just call them degenerates?) on Kalshi are pricing for an 18% chance of a rate hike in 2025. Have a great Thursday!

The Big Question: What would have to change in the macro environment to get the Fed to return to rate cuts? Is there any chance they can hike? 

Banana Brain Teaser

Previous

Three-fourths of the area of a rectangular lawn 30ft wide by 40ft long is to be enclosed by a rectangular fence. If the enclosure has full width and reduced length rather than full length and reduced width, how much less fence will be needed?

Answer: 5

Today

Last year, a state senate consisting of only Republican and Democrat members had 20 more Republican members than Democrat members. This year, the senate has the same number of members as last year, but it has 2 fewer Republican members than last year. If this year, the number of Republican members is 2/3 the number of senate members, how many members does the senate have this year?

Send your guesses to [email protected]

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When interest rates are low, asset prices rise. When interest rates rise, asset prices fall. Everything else is noise.

Ray Dalio

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Happy Investing,
David, Vyom, Ankit & Patrick