Inflated Asset Classes and the National Debt

A question all of us get asked is have we gotten ahead of ourselves in a multitude of asset classes, and what impact will all of them face when the country starts chipping away at the elephant in the room, the national debt. Here are a few thoughts on each of the asset classes to ponder about.

National Debt:

As of 11/14/2024, the total U.S. debt was $35.96 trillion, a 6.68% increase from the previous year. It has doubled in the last decade. The US has a statutory limit on Federal debt, but it has been reversed several times. There is a huge mismatch between spending & revenue.?

Every day the US spends $2.4 billion just on interest to service the debt. This amounts to $1,049 million in annual/debt service this year, up 30% from the same period a year ago.?

Looking back 10 years to 2014, the national debt was $17.8 trillion. In 2004 it was $7.4 trillion. In 1994, $4.6 trillion, in 1984 $1.5 trillion, and in 1974 it was $475 billion. That’s an amazing increase in 50 years from ($475 billion to $35.96 trillion)

Real Estate:?

For October 2024 the median sales price for a single-family home in the USA was $420,400. The highest recorded median sales price for a single-family home in the USA was $434,000 in March of 2024. Between 2019 and 2023 alone, the price increased by more than $100,000.?

For October 2024, in New Hampshire, the median sales price for a single-family home was $503,250. For October 2024, in the Lakes Region, which is comprised of 25 towns and cities, the median sales price for a single-family home was $477,500 however, it was a bit higher in September at $519,000.?

Homes were flying off the shelves in the first 2 years of the pandemic when rates were low, but when the interest rates rose, many homeowners stopped selling so they wouldn’t have to trade a low mortgage rate for a high one. That dynamic called the mortgage rate lock-in effect has exacerbated the housing shortage. The nation's home builders are benefitting from this.?

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·? ? ? American home sales this year hit their slowest pace since the financial crisis era of 2010

·? ? ? A record number of US homes are worth $1 million or more, and many million-dollar properties are no longer considered luxury homes?

·? ? ? One of America’s biggest mansions at 50,000 sg ft in Los Angeles, just hit the market for $195 million.

·? ? ? Luxury markets across the country are seeing an uptick in high-end luxury property offerings for example, in May 2024, Tarpon Island, a private 2.3-acre island in Palm Beach, Florida, sold for $152 million, setting a new record for oceanfront properties in the area. Another sale in Malibu, California, sold for $210 million, making it the most expensive home ever sold in California. A New York City penthouse sold for $135 million.?

·? ? ? Roughly $2 trillion in commercial/real estate loans are expected to mature between now and 2026, according to the mortgage rate bankers assoc. & many traditional lenders are sidelined on commercial rewrites.

Bitcoin: The price of bitcoin in US dollars as of 11/14/2024 was $88,828. Bitcoin's recent rally hit a new all-time high of $93.462 this week and then settled lower as traders monitored its path toward the significant $100,000 level. If you go back to 2 years ago, on 11/14/2022, it was priced at $16.618. However, 3 years ago, on 11/14/2022, it was priced at $64.414, a huge disparity. If you bought it just 2 years ago, look at the huge gains, a 434.5% increase!?

Gold: The price of 1 ounce gold as of 11/14/2024 was $2,579 per 1 ounce. The all-time highest price of gold was recorded on 10/30/2024 at $2788.54 per ounce. In 2024 alone, gold has set 36 fresh all-time highs.

Silver: The price of 1 ounce of silver as of 11/14/24 was $30.56, Towards the end of the 1970’s, silver hit $48.70 per ounce however, that record was not reached honestly because the bid price was driven by the Hunt Brothers, who attempted to corner the market which turned out to be a disaster in 1980 the price plunged to $11 per ounce. Silver’s highest average annual price was in 2011, when it hit $35.12 per ounce.??

Stock Market:

·? ? ? The Dow Jones industrial average hit its record high on 11/11/2024, closing at 44,293, On 11/14/2024, it dropped a bit to 43,735. If you look back 10 years, on 11/14/2014, the Dow Jones finished at 17,652. You can see the Dow Jones increased 2.5 times over that 10-year period?

·? ? ? The S+P 500 finished at 6017 for the first time in its history on 11/11/2024. The S+P has gained 26% since the start of the year out pacing The Dow’s 18% increase over the same period. As of 11/14/2024, the S+P dropped slightly to 5945 as the fed chair signaled a “sometimes bumpy path” toward inflation and “is not sending any signals that we need to be in a hurry to lower rates.” If you look back 10 years to 11/12/2014, the S+P index closed at 2039. You can see it increased threefold over that 10-year span

·? ? ? On 11/11/2024, the NASDAQ Composite Index hit an all-time high with a closing value of 19,298. As of 11/14/2024, it retreated slightly to 19,112. If you look back 10 years to 11/12/2014, the index closed at 4,660. You can see it increased fourfold over that 10-year span.

·? ? ? The magnificent seven reached epic highs. Nvidia’s market cap just reached $3.65 trillion, putting it comfortably ahead of 2nd place Apple.

·? ? ? According to David Einhorn, the founder of hedge fund Greenlight stated, “The market isn’t just making all-time highs, it is by many measures the most expensive stock market that we have seen since the founding of Greenlight in 1996”.

There is no question that the above asset classes have approached record highs this past year. History tells us that most asset price cycles make adjustments and corrections to their upward trajectories. The big question is where we are now in the cycle.

This article was written by Frank Roche. Frank is president of Roche Realty Group in Meredith, NH, and can be reached at (603) 279-7046. Data was compiled by a NEREN? search on 11/14/2024 and is subject to change. Please feel free to visit www.rocherealty.com to learn more about the Lakes Region and its real estate market.