Awaiting Jerome Powell – The Daily Tearsheet

Vital Statistics:

Stocks are flattish as we await comments from Jerome Powell this morning. Bonds and MBS are up.

The bond market will be looking for hints that Jerome Powell is becoming more worried about an economic slowdown and less about tariffs. We have seen several Fed speakers admit that the feared tariff inflation has been lower than initially feared, and has yet to really materialize.

The July Fed Funds futures are starting to price in a meaningful chance of a cut, and the September futures see a cut as a near-certainty.

The Chicago PMI fell 0.1 points to 40.4 in June, according to the Institute for Supply Management. The index has been below 50 (i.e. normalcy) for the past 19 consecutive months. The fall was driven by a decrease in employment, deliveries and backlogs, however these were offset by an increase in new orders. Prices paid increased by 8.3 points and reached the highest since May 2022.

Condo prices fell 2% in May, the second biggest decline on record. Increasing HOA fees and insurance costs are a big driver. The median U.S. condo sale price fell 2.2% year over year to $354,100 in May. “It’s a slow housing market across the board, but condos have been hit particularly hard,” said Aditi Jain, a Redfin Premier real estate agent in the Boston area. “A lot of condo associations don’t allow buyers with FHA loans, which is limiting sales. Two of my clients who want to buy a condo have had to back out of a purchase because they couldn’t get financing.”

Condo sales are falling as well

Much of the stress in is Florida, where prices in Deltona fell 32%. Houston, Tampa, and Oakland are also seeing 20%+ price declines. These were areas that experienced a pandemic building boom which has created an oversupply situation.

Falling mortgage rates should help address the affordability issue, although that might be a 2026 phenomenon.