Weekly Market Update by Retirement Lifestyle Advocates

Consumer Sentiment Falls

         The University of Michigan Consumer Sentiment Survey, released last week, found that Americans are becoming increasingly gloomy about the economy.

         The Index of Consumer Sentiment was down 11% from February to March, indicating that American consumers are becoming more pessimistic about the US economy.

         The University of Michigan Consumer Sentiment indicator registered 50.8 during March, far below the 20-year average level of about 80.  A higher number in the survey indicates that consumers are more optimistic about the economy, while a lower number indicates more pessimism.

         The current level is about on par with the all-time historical low recorded in June of 2022.

CNBC/Survey Monkey Poll Finds That 73% of Survey Respondents are “Financially Stressed”

         A survey of 4,200 US adults between April 3 and April 7 found that 73% of survey respondents were “financially stressed”.

         38% of survey respondents were “very stressed” financially.  29% of survey respondents earning more than $100,000 annually also described their personal financial situation as “very stressed”.

         86% of survey respondents cited inflation as the leading cause of their financial stress, while 75% pointed to interest rates as a cause of stress.

Existing Home Sales Plummet

         Since the publication of my “New Retirement Rules” book, I have been forecasting that risk assets will have to fall in real value; in other words, priced in gold, risk asset values will decline.

         While risk assets can include many asset classes, the most common assets referred to as risk assets are stocks and real estate.  As if on cue with the stock market decline, home sales also declined.

         Existing home sales receded 5.9% in March according to the National Association of Realtors, or NAR.  Total existing home sales, defined as completed transactions that include single-family homes, townhouses, condominiums, and co-ops, fell 5.9% from February.  That’s a whopper of a one-month decline.

         Year-over-year, comparing March 2025 sales with March 2024 sales, home sales fell 2.4%.

         As one might expect, the National Association of Realtors blamed higher mortgage rates for the decline.  NAR Chief Economist, Lawrence Yun, had this to say about the decline, “Home buying and selling remained sluggish in March due to affordability challenges associated with high mortgage rates.  Residential housing mobility, currently at historical lows, signals the troublesome possibility of less economic mobility for society.”

         The reality is that in the context of history, mortgage rates are not high, although an economist employed by the National Association of Realtors is pretty much required to put the best possible spin on the real estate market.

         Zeroing in on details in the National Association of Realtors report, one finds that the median home sales price climbed 2.7% from March of 2024 to $403,700, which was an all-time high for the month of March and the 21^st consecutive month of year-over-year price increases. 

         But are real estate prices actually increasing?  Or, are the nominal prices of real estate increasing because the dollar buys less?

         One way to calculate the inflation-adjusted value of real estate is to determine the price of real estate in gold, which has been money for most of history.  While every currency in the world is presently a fiat currency, this is a relatively new development in the slowly evolving world of currencies.

         Doing a little reverse math, if real estate prices rose 2.7% year-over-year and the current median home sales price is $403,700, then the median home sales price one year ago was about $393,000. 

         Now, let’s adjust those dollar median prices to median prices in gold.  Presently, as I write this, gold closed at $3,334 per ounce.  Taking the current median home value of $403,700 and dividing it by the price of gold per ounce, one concludes that the median home value priced in gold is 121 ounces.

         One year ago, the median home value price in dollars was $393,000.  On April 25, 2024, the price of gold in dollars per ounce was $2,330.  That puts the median home price in gold at about 168 ounces.

         Priced in gold, home values have fallen 25% in the last year.  While this may seem extreme, look at the chart of the US Dollar index above, which measures the purchasing power of the US Dollar compared to the six major trading partners of the United States.

         Over the past three months, the dollar’s purchasing power has declined by 10% compared to the fiat currencies of the United States' trading partners and has fallen by about 7% over the last 12 months.  It’s important to remember that these fiat currencies against which the US Dollar’s purchasing power is measured are also losing absolute purchasing power, just not as fast as the US Dollar as of late.

         If you’re curious, here are the currencies used in the US Dollar Index for purchasing power comparison purposes, along with their weightings in the index: Euro, 57.6%; Japanese Yen, 13.6%; British Pound, 11.9%; Canadian Dollar, 9.1%; Swedish Krona, 4.2%; Swiss Franc, 3.6%.  

RLA Radio

         This week’s RLA radio program features an interview that I did with Dr. Jonathan Newman of the Mises Organization.  We discuss current economic policies and the likely economic and investment outcomes resulting from these policies.  The interview is now available by clicking on the "Podcast" tab at the top of this page.

Quote of the Week

“The surprising thing about young fools is how many survive to become old fools.”

                                             -Doug Larson