Big investors barred from buying America’s homes
Summary
Recent data shows a mixed but evolving picture. The labor market is softening, the trade deficit is narrowing, and inflation remains modest. Markets are pricing slower growth, not recession. The S&P 500 rose 1.6% last week and is up 1.8% YTD. The 10-year Treasury ended at 4.18%.
Lowest job gains since the pandemic
The most consequential release was December’s employment report. Payrolls rose by just 50,000, the smallest monthly gain since the pandemic. That capped a notably weak 2025, with roughly 584,000 jobs created for the year, well below expectations and far short of 2024’s approximate 2 million gain.
Despite slower hiring, the unemployment rate edged down to 4.4%, driven in part by labor force dynamics. Wage growth accelerated modestly to about 3.8% year over year.
Equity markets moved to record highs as investors interpreted the low-hire, low-fire environment as consistent with continued expansion and the possibility of policy easing later in 2026. At the same time, expectations for an imminent shift in policy remain limited. Markets now assign a 5% probability to a January rate cut, with any easing more likely later in the year.
Weekly jobless claims reinforced this theme. Claims rose by 8,000 to 208,000, signaling some softening without evidence of stress. Overall, the labor market continues to cool gradually rather than break.
Housing data mixed and a notable policy signal
Housing data released last week were mixed and point to a modest pace of activity. Housing starts rebounded by roughly 5.4%, while building permits, a leading indicator of future construction, slipped slightly. Developers remain cautious as they contend with elevated costs, slower sales, high mortgage rates, and ongoing affordability challenges.
Last Wednesday, President Trump announced that he would bar institutional investors from buying single-family homes. While the decision was touted as a measure to increase affordability, it is less about economics and more about signaling. Large investors didn’t create the housing shortage—a lack of building did. Yet institutions became an easy villain in a market where affordability feels broken. Restricting institutional capital may reduce competition at the margin, but it also risks pulling liquidity from a market that still needs investment to support construction, renovation, and rental supply. Homes became financial assets because scarcity made them so, not the other way around.
The week ahead
Last week’s data, particularly the weak jobs report, nudged market expectations about the timing of Federal Reserve rate cuts. An early move now looks less likely, though easing later in the year remains plausible if labor market softness persists and inflation continues to cool.
Markets will turn their attention to inflation data this week. On Tuesday, January 13, December’s Consumer Price Index will take center stage, as it remains the most influential input for near-term Fed guidance.
On Wednesday, January 14, November’s Producer Price Index will be watched for early signs of whether underlying cost pressures are continuing to ease or quietly rebuilding.
Thursday brings U.S. import and export price data, offering insight into how global pricing dynamics and currency movements may feed into domestic inflation in the months ahead.
Federal Reserve speakers are also scheduled throughout the week and could further shape expectations around the policy outlook.
Disclaimers
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