The relative affordability of the typical new home sold in the U.S. remained near its all time lows in December 2022. That outcome occurred despite new home sale prices and mortgage rates falling during the month.

Meanwhile, data revisions affecting median new home sale prices and median household income confirm October 2022 as the all-time record low for the affordability of new homes in the U.S. The revised data also confirms the new homes were even less affordable than the previous estimate indicated. The following chart shows that a mortgage payment on the median new home sold in the U.S. during December 2022 would consume 41.6% of the monthly income earned by the typical American household, down from the record of 49.3% recorded for this measure in October 2022.

The period from July through December 2022 represents the least affordable for Americans in history. All but one month during this time exceeds the peak of unaffordability recorded for April 2006 during the first U.S. housing bubble.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 26 January 2023. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 26 January 2023. 

Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 5 February 2023. Note: Starting from December 2022, the estimated monthly mortgage rate is taken as the average of weekly 30-year conventional mortgage rates recorded during the month.

On Friday, 3 February 2023, an unexpectedly large upward adjustment to the number of employed Americans in the January 2023 employment situation report prompted investors to reset their expectations for how high the Fed's rate hikes will go before peaking. Before the report was issued, investors were looking for the Fed's rate hikes to top out in the 4.75%-5.00% range in March 2023. After the report, their expectations changed to anticipate a peak target rate range of 5.00%-5.25% being hit in May 2023.

In response, the trajectory of the S&P 500 (Index: SPX) shifted downward to close the week at 4,136.48, which was still up from the previous week's close. That's not unexpected, because the index has been running on the high side of the redzone forecast range in the dividend futures-based model's alternative futures chart:

The week also saw continued improvement in the expectations for the S&P 500's quarterly dividends per share during 2023, which we'll revisit separately in a couple of weeks since we just featured it in the previous edition of our running S&P 500 chaos series. For now, we'll simply observe these positive changes in expectations are shifting the trajectory of the S&P 500's alternative futures upward.

Here are the past week's market-moving headlines:

Monday, 30 January 2023

• Signs and portents for the U.S. economy:
• Oil falls 2% as rate hikes loom and Russian flows stay strong
• Big bets being placed on Fed minions ending rate hikes in March 2023:
• Fed's words in focus as markets bet rate hikes will soon end
• Not really unexpected bigger trouble developing in the Eurozone:
• German economy unexpectedly shrinks in Q4, reviving spectre of recession
• Better than expected news in China, more stimulus rolls out:
• China's factory activity likely contracted more slowly in January: Reuters poll
• China central bank to roll over lending tools to spur growth
• But still bigger trouble developing around China:
• South Korea Jan exports to extend falling streak to fourth month: Reuters poll
• Taiwan export orders seen contracting at faster pace in Dec: Reuters poll
• Other central bank minions continue rate hikes as they face test:
• The 2% target: Central banks' inflation touchstone faces post-pandemic reckoning
• RBI to hike repo rate by 25 bps in Feb, ending tightening cycle: Reuters poll
• Hungary cbank could start "cautious" rate cuts once CPI slows - minister
• Bank of England poised to raise interest rates for 10th time in a row
• But not BOJ minions as they strive to keep never-ending stimulus alive:
• BOJ Kuroda stresses need to maintain ultra-easy policy
• Nasdaq falls as megacaps drop ahead of earnings, Fed meet in focus

Tuesday, 31 January 2023

• Signs and portents for the U.S. economy:
• Bond investors brace for recession as Fed expected to slow pace of tightening
• Oil prices settle steady on higher U.S. demand, weaker dollar
• U.S. consumer confidence ebbs in January; inflation expectations rise
• Fed minions want to get debt assets off their balance sheet:
• Fed officials see lots of room to shed bonds from balance sheet
• Bigger trouble developing in the Eurozone:
• German retail sales post surprise plunge in December amid rising prices
• Italy's economy contracts by 0.1% in Q4, raising recession fears
• Economic growth returns in China after Xi's zero-COVID lockdowns lifted, but damage done:
• China economic activity swings back to growth in January - official PMI
• China's industrial profits contract in 2022 on COVID woes
• Central bank minions starting to think they've hiked interest rates enough:
• Bank of Korea board cautious on more rate hikes - Jan meeting minutes
• ECB minions wondering how many more rate hikes they need:
• Euro zone banks tighten credit by most since debt crisis, ECB says
• Wall St gains over 1% after encouraging inflation data with Fed next

Wednesday, 1 February 2023

• Signs and portents for the U.S. economy:
• U.S. job openings unexpectedly increase in December
• Oil dives $3 after U.S. EIA reports big builds in U.S. crude, fuel stocks
• U.S. construction spending unexpectedly fall in December
• U.S. manufacturing sector sinks further in January - ISM
• Fed delivers small rate hike, still expects 'ongoing increases'
• Fed's Powell: will need substantially more evidence to be confident inflation on downward path
• Fed's Powell: No one should assume Fed can protect economy in debt default
• Instant View-Fed opts for small rate hikes, expects to deliver 'ongoing increases'
• Sooner or later, Fed may need technical tweaks for rate control toolkit
• Bigger trouble developing in Asia, centered on China:
• China's Jan factory activity contracts at slower pace amid COVID infections - Caixin PMI
• South Korea slides toward recession as Jan exports plunge
• South Korea factory activity contracts in January at slightly milder pace - PMI
• Japan factory activity shrinks for third month in January
• Global factory activity contracted again in January, highlighting fragile recovery
• Bigger stimulus developing in China:
• China's Xi vows to help consumers spend 'without worries'
• BOJ minions have hands full keeping never-ending stimulus alive:
• BOJ's record bond buying highlights challenge for yield control
• ECB minions fear "sticky" inflation:
• Sticky underlying inflation set to keep ECB on its toes
• Wall St rallies as Fed's Powell nods to easing inflation after rate hike

Thursday, 2 February 2023

• Signs and portents for the U.S. economy:
• Oil slumps on economic data, stronger U.S. dollar
• U.S. weekly jobless claims drop to nine-month low; productivity gains speed
• U.S. factory orders rebound in December
• Fed minions happy to experience "disinflation":
• Explainer-The Fed says disinflation is welcome. What is that, exactly?
• Fed's Powell says no rate cuts this year, and markets hear it differently
• Analysis: Fed feeds Wall Street's soft landing hopes, though recession fears still loom
• Marketmind: Markets go all in for disinflation
• Central bankers thinking about slowing starling-like rate hikes, start to realize they may have a credibility problem:
• After a joint rate surge, central banks start to see the end in sight
• Bank of England raises rates, signals end to hikes
• Hong Kong's cenbank raises interest rate after Fed hike, HSBC keeps rate unchanged
• Denmark's central bank raises key rate to 2.1%
• Markets to central bankers: we don't believe you
• Central banks should stick to 'higher for longer' interest rate approach - IMF
• ECB minions excitedly deliver another rate hike, still thinking about more as Eurozone economy slows:
• ECB hikes rates, promises another 50 bps more in March
• ECB raises rates, signals at least one more hike
• ECB governors see at least two more rate hikes, sources say
• German exports drop 6.3% in Dec, suggesting slowing economy
• Nasdaq, S&P 500 close higher on Meta bump, Fed lift

Friday, 3 February 2023

• Signs and portents for the U.S. economy:
• U.S. reports blowout job growth; unemployment rate lowest since 1969
• Oil falls about 3% as strong U.S. jobs data prompt interest rate concerns
• U.S. service sector rebounds in January - ISM survey
• Fed minions expected to keep hiking rates higher:
• Fed seen likely to lift rates above 5% after strong jobs report
• Morgan Stanley sees another 25-bps Fed hike in March after strong jobs report
• Fed's Daly sees policy rate rising to least 5.1%, then a hold
• Smaller stimulus than expected developing in China:
• Exclusive-China eyes help for shell-shocked consumers but big stimulus unlikely-sources
• BOJ minions excited to see rising wages, not sure who their next boss will be:
• BOJ's Kuroda sees wages rising 'quite significantly'
• BOJ governor race gets a twist after top contender Nakaso take APEC role
• Other central banks put rate hikes back on the table after U.S. jobs report:
• Major central banks rekindle rate hike push after dry January
• ECB minions looking forward to next rate hikes, expect higher inflation for longer:
• ECB set to raise rates again in May, policymakers say
• Analysis-ECB policymakers converging on end-point for rate hikes
• ECB terminal rate could be above current market pricing: Wunsch
• Euro zone inflation seen just above ECB's target in 2025, poll shows
• Wall Street ends down after stunning jobs growth raises Fed questions
• Jobs report jolts Wall Street bulls as inflation fears return
• Tech earnings hit pause button on market rally

After the Fed's expected quarter point rate hike last week, the CME Group's FedWatch Tool still projects another quarter point rate hike at the Fed's upcoming 22 March (2023-Q1) meeting, followed by another at its 3 May (2023-Q2) meeting, with the latter representing the last for the Fed's series of rate hikes that started back in March 2022. After that, the FedWatch tool anticipates the Fed will hold the Federal Funds Rate at a target range of 5.00-5.25% through September 2023. After which, developing expectations for a U.S. recession in 2023 have the FedWatch tool projecting two quarter point rate cuts, in November and December (2023-Q4).

The Atlanta Fed's GDPNow tool's projection for real GDP growth in the first quarter of 2023 held steady at +0.7%. Meanwhile, the so-called "Blue Chip" consensus forecast is leaning toward negative GDP growth in the current quarter.

In our world of pressure-sensitive, self-adhesive stamps, it seems strange anyone would think it normal to lick a postage stamp before mailing a letter. But that world has only existed for Americans since 1992, when the U.S. Post Office introduced them to the nation. After that, even the thought of licking stamps had all but disappeared within 13 years.

But before that time, licking stamps was a frequent activity. For most, it was the easiest way to affix the proof that the cost of postage to send a letter through the U.S. mail had been paid. Many Americans before the age of self-sticking stamps would agree it was an awful experience.

That's because the taste of the glue the U.S. Postal Service applied to the back of stamps to get them to stick to paper envelopes after they were moistened was, shall we say, unpleasant. That design failure created an opportunity for American inventors, who quickly found a ready market made of anyone who might otherwise have to regularly lick a lot of stamps.

Donald Poynter was one of those inventors, who was awarded U.S. Patent 4,300,473 for his unique solution to the problem of licking the bad-tasting glue on the back of postage stamps. He describes his innovation in the patent's background section:

The present invention relates to an apparatus for moistening the adhesive coating on a postage stamp, envelope or the like and more particularly concerns a novelty device for performing this function.

Due to the unpleasant taste of adhesive coatings placed upon postage stamps, envelopes and the like, many persons using such articles dislike licking the coating with their tongue. Many other persons object to licking stamps for reasons of health and sanitation or personal propensities. For these or other reasons, it is desirable to moisten the adhesive coating by means which do not include the use of the human mouth.

Further, many people obtain great satisfaction from novelty devices. Therefore, for many people, it is desirable to present an apparatus for performing the highly useful function of moistening adhesive coatings in a novelty arrangement.

We know. You were on board until you got to the part about people obtaining satisfaction from novelty devices, which comes across like a strange plot twist. Fortunately, the text of the patent's abstract tells us exactly what he he had in mind for the specific apparatus he envisioned for his invention:

Apparatus for moistening adhesive coatings on postage material and the like which includes an enclosure having a container of liquid therein. A plunger is provided to lift an absorbant applicator from the liquid and pass the applicator through an opening in the side of the enclosure. A closure member for the opening is opened in response to the applicator movement. The applicator may be in the form of a human tongue and the closure may be in the form of a human lip.

And if that technical description doesn't do it for you, Figures 1 and 2 of the patent's illustration will complete the picture.

Basically, when a user depresses the button as shown in Figure 2, the "lips" on the box in Figure 1 open to reveal a tongue-shaped sponge that has been pre-moistened in an internal water reservoir. The sponge provided the moisture needed to activate the glue on the back of a postage stamp so it would stick to an envelope.

The advent of the self-adhesive stamp technology has made Poynter's invention obsolete. All the same, it's a testimony to the world that made the invention of the stamp-licking tongue depressor seem like both a good idea and a marketable product for an all-too-brief time.

From the Inventions in Everything Archives

We don't have any other examples of inventions that have become fully obsolete in the archives, but we do have the following discussions and essays on the topic of obsolescence.

• The Worst Piece of Design Ever Done
• Technology's End
• Where Humans Can Still Beat Machines

2023 got off to a rocky start for dividend paying stocks in the U.S. stock market. The number of firms announcing dividend reductions jumped back above the threshold indicating recessionary conditions are present in the U.S. economy. Meanwhile, the number of dividend increases announced during January 2023 presents a more mixed picture, up month over month, but down year over year.

These changes are visualized in the following chart.

With the new year, we're revamping how we present the U.S. stock market's monthly dividend metadata. The following table presents the data for the just completed month of January 2023, the preceding month of December 2022, and the year ago month of January 2022. We've also presented the Month-over-Month (MoM) and Year-over-Year (YoY) changes for January 2023's dividend metadata:

Our sampling of dividend decreases only captured 13 of the 65 reported divieend reductions. They are predominantly concentrated in the U.S. oil and gas sector among firms that pay variable dividends to their shareholding owners. These firms have made frequent appearances in recent months, coinciding with the ~35% decline in the price of crude oil from early June through December 2022. Dividend reductions most often represent a mildly lagging indicator for declining business conditions, so their appearance in January 2023 is not unexpected.

Here's the list for our sampling, where we also find industrial representation from the real estate and financial services sectors of the economy.

• MV Oil Trust (NYSE: MVO)
• Sabine Royalty Trust (NYSE: SBR)
• BP Prudhoe Bay Royalty Trust (NYSE: BPT)
• Gladstone Commercial (REIT-Diversified) (NASDAQ: GOOD)
• KNOT Offshore Partners (NYSE: KNOP)
• Permianville Royalty Trust (NYSE: PVL)
• Vornado Realty Trust (REIT-Office) (NYSE: VNO)
• Dorchester Minerals (NASDAQ: DMLP)
• Permian Basin Royalty Trust (NYSE: PBT)
• Hugoton Royalty Trust (OTC: HGTXU)
• VOC Energy Trust (NYSE: VOC)
• Mesa Royalty Trust (NYSE: MTR)
• Artisan Partners Asset Management (NYSE: APAM)

Going back to the dividend metadata, we're surprised we're not seeing more firms being recorded as omitting (or suspending) their dividend payments to shareholders. We suspect Standard and Poor is including them with the number of dividend decreases they report. That makes sense since both dividend cuts and omissions count as unfavorable changes, which we're now tracking in our monthly dividend metadata summary.

Reference

Standard and Poor. S&P Market Attributes Web File. [Excel Spreadsheet]. Accessed 1 February 2023.

Political Calculations' initial estimate of median household income in December 2022 is $79,405, an increase of $193 (or 0.2%) from the initial estimate of $79,212 in November 2022.

The latest update to Political Calculations' chart tracking Median Household Income in the 21st Century reflects the results of that revision, showing the nominal (red) and inflation-adjusted (blue) trends for median household income in the United States from January 2000 through December 2022. The inflation-adjusted figures are presented in terms of constant December 2022 U.S. dollars.

Adjusted for inflation, December 2022's estimated median household income represents a new record peak for this demographic characteristic, exceeding the revised December 2021's previous peak by $1,499. We also observe the effect of inflation continues to be muted, coinciding with the substantial decline in oil prices since the early June 2022. That decline has offset the effect of other rising prices, where increases in the cost of food has been significant.

Taking a step back to look at the average personal income earned by individual Americans, we find their inflation-adjusted income has not yet recovered to its December 2021 level.

Zooming in to look just at the Biden era, we see that nominal earned income growth slowed considerably after December 2021.

Adjusted for inflation, personal earned income growth shrank in the first half of 2022 before bottoming in June 2022, coinciding with the nation's technical recession. It grew at a relatively steady rate in the second half of 2022.

Analyst's Notes

The U.S. Census Bureau released updated population estimates extending back to March 2020. These changes were both positive and progressively substantial. By positive, we mean that all estimates were increased over their previously reported level. By progressively substantial, we mean that the smallest adjustment (+1,000) was made for March 2020, with most months seeing a progressively larger upward adjustment ending with November 2022 seeing the biggest increase (+744,000). That's a substantial change.

By contrast, the BEA made minor downward adjustments to its aggregate wage and salary data for only the months of October 2022 (-0.1%) and November 2022 (-0.3%).

The combined effect of these changes is most notable for November 2022. As noted earlier, our pre-revision median household income estimate for month was $79,212. November 2022's estimate fell by $135 (-0.2%) to $79,077 after these revisions superseded the previous data. Revisions in our estimates of median household income for the other months from March 2020 through October 2022 are smaller.

During March 2023, the U.S. Census Bureau will collect survey data from roughly 75,000 households for its Annual Social and Economic Supplement. It will take nearly six months to analyze the data it compiles before presenting its annual estimate of the U.S. median household income for the 2022 calendar year on Friday, 8 September 2023.

References

U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Population. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 27 January 2023. Accessed: 27 January 2023.

U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Compensation of Employees, Received: Wage and Salary Disbursements. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 27 January 2023. Accessed: 27 January 2023.

U.S. Department of Labor Bureau of Labor Statistics. Consumer Price Index, All Urban Consumers - (CPI-U), U.S. City Average, All Items, 1982-84=100. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 12 January 2023. Accessed: 12 January 2023.