US Housing Crisis: The Silent Driver Behind Market Anomalies
The recent resurgence of 2021-style meme stock activity and record assets in money market funds in the US isn't due to investors simultaneously betting on high-risk and low-risk strategies. The real culprit? The broken US housing market. High prices and interest rates are pushing cash into meme stocks and money market funds; risk-seeking investors buy the former, while risk-averse investors choose US Treasuries/money market funds. A record number of millionaire renters highlights the severity of the problem. Three potential future scenarios for the housing market are outlined: a decade-long stagnation, a price melt-up followed by a crash, and massive construction leading to price declines. The author considers the latter least likely due to the entrenched nature of the US housing market and resistance to new construction.