Housing Seems OK, but Beneath the Surface, It’s Another Story

The economic bellwether has posted some good numbers, although analysts say problems lurk in the long run.


Housing, a key component of the economy and often a harbinger of its direction, has been doing well on the surface. But given continued high mortgage rates and dwindling affordability, how long can that last?

Housing starts rose 7% in September to 1.358 million, missing the consensus forecast of 1.383 million.

While last month’s results were still pretty good, most of it was multi-family building in Southern states, not single-family homes, observed Peter Essele, head of portfolio management for Commonwealth Financial Network, in a research note. In investment terms, houses usually deliver more profit.

More importantly, the number of new apartment units is declining. This suggests “that new construction may follow suit in the coming months,” he wrote.

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New home sales were also up in September, certainly another good sign, signaling continued strong demand. It may not be sustainable, however. “The accumulating effect of higher mortgage rates (and interest rate costs for builders themselves) are denting sentiment” for the future, wrote Jamie Cox, managing partner in the Harris Financial Group. “Such will only make shelter more expensive and unaffordable for the most interest rate sensitive borrowers.”

Meanwhile, sales of existing homes are lower: 3.96 million homes were sold in September, down from 4.68 million one year prior, according to the National Association of Realtors. Small wonder: Prices have climbed high, likely due to the lagging inventory of new homes (ongoing since the Great Financial Crisis), and now there is the added burden of lofty mortgage rates. The St. Louis Fed’s Housing Affordability Index slid 16% as of last month, compared with September 2022.

Interest on a 30-year fixed-rate mortgage averaged 7.63% for the week ending October 19, according to Freddie Mac. One year earlier, the 30-year mortgage averaged 6.94%. Interest on a 15-year fixed-rate mortgage averaged 6.92% as of the same date, up from 6.23% a year earlier.

Despite some growth, the overall situation appears little better, in part because the Federal Reserve has indicated it is in no hurry to lower interest rates. “High interest rates will restrain housing construction, sales, prices and employment into 2024,” commented Bill Adams, the chief economist at Comerica Bank.

“Underneath the surface, there is trouble brewing in housing,” warned Harris Financial’s Cox.

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Princeton Endowment Declines 1.7% in Fiscal 2023

Ivy League endowments trended weaker in the year that ended June 30, but Princeton is the first institution to report a result in the red.



Princeton University’s endowment
returned negative 1.7% in fiscal 2023, the university announced on Wednesday, continuing a trend of weaker performance by university endowments. The value of Princeton’s endowment as of June 30 stood at $34.1 billion, the fourth largest in the U.S. but down from $35.8 billion one year earlier. It is the endowment’s second consecutive year posting a negative return on the heels of 2021’s record 46.9% return. 

The return is the only negative result among the seven Ivy League returns released so far: Columbia University (4.7%), Harvard University (2.9%), Brown University (2.7%), Yale University (1.8%), Dartmouth College (1.6%) and the University of Pennsylvania (1.3%). Cornell University has yet to release its endowment’s 2023 return. 

Like many peers, Princeton’s endowment has a large allocation to alternative investments, which did not perform well in the fiscal year that ended on June 30. According to the Princeton University Investment Co., 30% of the portfolio was allocated to private equity and 18% to real assets. 

Princeton endowment returns provide roughly two-thirds of the university’s operating revenues, and 70% of the undergraduate financial aid budget is covered by the endowment, according to the university.  

For the last 10 years, the Princeton endowment reported an average annual return of 10.8%, and it was 10.5% for the last 20 years. PRINCO CIO Andrew Golden plans to retire in June 2024 after 28 years at the university.  

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Princeton Endowment Loses 1.5% in Fiscal 2022 

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