With all eyes on the Fed’s meeting next week, concerns about another sizeable rate hike not only tanked the stock market but also pushed 30-year fixed mortgage rates to 6% which is at the high-end of the 5.5% to 6% range set in the April/May period (a move which initially drove a -15% decline in residential transactions compared to the beginning of 2022). However, all is not lost in the world of real estate & Redfin recently reported that consumers are starting to get comfortable with current rates so long as they don’t move up substantially. Also, Redfin reported that home prices have declined in line with seasonal patterns (-5% to -6% from May/June levels) which is generally encouraging. This reflects modest inventory levels as sellers have been slow to come to the market because of their reticence to trade up from a 3% mortgage to a 6% mortgage. Fortunately, buyers who have had a tough time in the last few years winning bidding wars are now excited about the possibility of scoring a home. Lowes also recently offered some encouragement by reporting: that there are no signs pointing to a dramatic step-down in consumer strength going into next year, and 90% of Lowe’s customers have existing fixed interest rate mortgages (sub 3%) & are immune to Fed rate hikes. Management noted that homeowners are incented to stay in their existing homes because the housing stock is short 1.5MM – 2MM houses and it will take a considerable amount of time for building activity to catch up. Lowes believes it is sitting pretty as homeowners have $1.8 trillion in additional savings post-covid to spend on home improvements. Lastly, we would add that even the CEO of Dollar General offered some encouragement about low-income consumers whom he believes should weather this economic storm if they remain employed (even though it will be difficult for the next quarter or so). In conclusion, all is not lost so long as the Fed & California do not hurl us over the cliff.