In May, we had revised our 2024 real GDP growth projection upward by 50 basis points to 1.5%-2.0% due to a somewhat firmer demand than previously anticipated. Additionally, we increased our forecast for 2024 CPI inflation by 25 basis points to 2.75%-3.25%.
The Fed is likely pleased with the latest personal income report, as its preferred inflation gauge eased while consumer spending remained resilient. This keeps at least one Fed rate cut this year on the table. Prices, however, remain sticky among some sub-indexes, suggesting the bar for more than one cut is higher.
Homeownership is becoming unattainable for many Americans due to rising house prices, modest income growth, and high mortgage rates (chart above). The NAHB/Wells Fargo Cost of Housing Index indicates that in Q1, a median family needed 38% of their income for a new home and 36% for an existing one. Regional affordability varies, with the Midwest remaining mostly affordable, while the West is largely unaffordable.
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