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Three Technology Investments to Buy Despite New White House Policy on AI

Three technology funds to buy offer long-term potential for potent upside despite the Biden administration’s newly announced policy aimed at regulating…

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Three technology funds to buy offer long-term potential for potent upside despite the Biden administration’s newly announced policy aimed at regulating use of artificial intelligence.

Even though the three technology investments to buy rebounded in the first part of 2023 after the sector slid more than 30% in 2022, they have pulled back along with the market in recent months but do not appear to be in danger of a meltdown. If investors can withstand headwinds of higher-for-longer interest rates, runaway federal deficits and rising political risk with Russia’s unrelenting war in Ukraine amid escalating attacks in the Middle East following the murderous Oct. 7 rampage by Hamas inside Israel.

I cautioned in a column earlier this year that governments may start to regulate artificial intelligence and affect the independence of companies to pursue the plans of their choice. President Biden did not wait long before announcing on Oct. 30 that he would begin federal oversight of the technology advances.

“To realize the promise of AI and avoid the risks, we need to govern this technology,” President Biden said during his Oct. 30 press briefing.

Three Technology Investments to Buy: Reasoning for Executive Order

The president described the executive order he signed on Oct. 30 as the “most significant action” any government anywhere in the world has ever taken on AI safety, security and trust. The order builds on previous steps to ensure the “AI Bill of Rights” by bringing together AI companies that agreed to voluntarily make sure the technology is safe and secure, he added.

“I am invoking what’s called the Defense Production Act that federal government uses in the most urgent of moments, like mobilizing the nation during… a time of war or developing COVID vaccines during the pandemic,” President Biden said. “This executive order will use the same authority to make companies prove that their most powerful systems are safe before allowing them to be used.”

That means companies must tell the government about the large-scale AI systems they’re developing and share rigorous independent test results to prove they pose no national security or safety risk to the American people, President Biden said. At the same time, President Biden said he would direct the Department of Energy to ensure AI systems don’t pose chemical, biological, or nuclear risks.

In the wrong hands, AI can make it easier for hackers to “exploit vulnerabilities” in the software that makes society run, President Biden said.

For that reason, President Biden said he was directing the Department of Defense and the Department of Homeland Security to develop “game-changing cyber protections” that will make computers and critical infrastructure more secure than it is today. As part of that response, President Biden said his administration would take “decisive steps” to prevent the use of cutting-edge AI chips to undermine U.S. national security, he added.

Three Technology Investments to Buy: XLK

The first of the three income-technology investments to buy that will use artificial intelligence is Technology Select Sector SPDR Fund (NYSE: XLK), featured in the Forecasts & Strategies investment newsletter led by Mark Skousen, PhD. That fund had jumped 33.04% in 2023 through June 8, but it has dipped a bit since then. The fund still is up 32.65% on a total return basis through Oct. 30.

Source: Stockcharts.com

Investors who can stomach volatility may want to tap these technology equities in pursuit of potent performance.

“Bear in mind that governments may start to regulate artificial intelligence and affect the independence of companies to do what their management teams want,” I wrote in my June 20 dividend column.

Technology entrepreneur Elon Musk, the owner and CEO of Twitter, Inc. (NYSE: TWTR), CEO of Tesla Inc. (NASDAQ: TSLA) and founder and CEO of privately held SpaceX, said on a recent podcast with presidential candidate Robert F. Kennedy Jr. that China is planning to initiate the regulation of artificial intelligence.

Skousen, a strong advocate of XLK, serves as a Presidential Fellow at Chapman University, as well as the head the Forecasts & Strategies investment newsletter. Skousen, who is a descendant of founding father, diplomat and inventor Benjamin Franklin, also is a seasoned stock market forecaster.

Mark Skousen, head of Five Star Trader and scion of Ben Franklin, talks to Paul Dykewicz.

In a presentation Skousen gave last Sunday, Oct. 29, at the MoneyShow in Orlando, he spoke about “The Fed Disaster Plan.” Skousen told attendees how the Federal Reserve has aggressively raised interest rates and created an inverted yield curve. The U.S. central bank leaders have raised rates faster than any other time in the past 30 years, taking its toll on Wall Street, Skousen added.

“When you can get a 5.4% return on safe money market funds or government securities, it’s hard to stay invested in risky growth stocks,” Skousen opined.

So far, the economy has resisted recession; the federal government announced last week that real GDP in the third quarter rose 4.9%, due to strong consumer and government spending. But business continues to slump, which is the real key to the growing possibility of an all-out recession in 2024, an election year, Skousen counseled.

Three Technology Investments to Buy: Sell-off Reduces Price of Shares

Given that the stock market has suffered its worst two weeks of the year, falling into correction territory, those looking to purchase shares of good stocks now can do so at reduced prices. Last week, the S&P 500 fell 2.5%. Despite a strong start to 2023, that index now is up just 8.5% through the first 10 months of the year, seasoned stock picker Jim Woods wrote in the just-completed November edition of his monthly Intelligence Report investment newsletter.

Paul Dykewicz meets with Jim Woods, head of Intelligence Report.

Since August, investors have reduced their interest in technology, Woods wrote. The S&P 500 recently fell to fresh five-month lows as earnings lagged, with many companies falling short of projected earnings per share (EPS), revenue or margins, he added.

“The selling was disproportionately centered on the tech names, and it’s fair to say that tech weakness and earnings disappointment has been the main driver of the declines in the S&P 500 in the final weeks of October,” Woods told his Intelligence Report subscribers.

While earnings season has been somewhat disappointing, it hasn’t been outright bad, Woods wrote. He described it as an expectation problem.

“Tech companies are not producing the kinds of growth that was assumed when the AI craze hit markets in May,” Woods explained. “As such, we are seeing those AI-driven gains given back.”

AI mania is not the sole reason for the 2023 gains, since falling inflation and resilient growth have contributed, too, Woods wrote. But the AI-driven rise in stocks during May and early June was based on very aggressive growth assumptions, so disappointment in that space is now another headwind for markets to face, he added.

Three Technology Investments to Buy: TDIV

A broad technology fund that also offers a dividend yield and some exposure to artificial intelligence is First Trust NASDAQ Technology Dividend Index (TDIV). The ETF seeks to track the Nasdaq Technology Dividend Index, which is composed of technology and telecommunications companies, said Bob Carlson, a pension fund chairman who heads the Retirement Watch investment newsletter.

Bob Carlson, head of Retirement Watch, gives an interview to Paul Dykewicz.

TDIV recently had 84 holdings, and its 10 largest positions accounted for 53.7% of its assets. The biggest weightings recently were Microsoft (NASDAQ:MSFT), IBM (NYSE: IBM) and Broadcom (NASDAQ: AGVO).

Source: Stockcharts.com

The fund with $1.9 billion in assets has produced a total return of 15.1% through Oct. 31 this year. It also offers a current dividend yield of 2.1%.

Three Technology Investments to Buy: Napco Security Technologies

Napco Security Technologies (NASDAQ: NSSC) is an Amityville, New York-based manufacturer of security products that offer advanced technologies for intrusion, fire, video, wireless, access control and door-locking systems. The company’s products are sold and installed by tens of thousands of security professionals worldwide to serve commercial, industrial, institutional, residential and government applications.

In addition, the company has a heritage of developing innovative technology and reliable security solutions for the professional security community, including StarLink Universal Wireless Intrusion & Commercial Fire Communicators and new StarLink Connect Radios with Universal Full Up/Download for major brands. Napco Security also offers Gemini Security & Fire Systems and the NAPCO Commercial Platform of 24V Addressable/Conventional/Wireless Systems and Firewolf Fire Panels & Devices.

Source: Stockcharts.com

When the Federal Reserve stops ratcheting up interest rates, expect strong growth stories to profit, said Michell Connell, who heads the Dallas-based Portia Capital Management. The company’s five-year revenue growth has been 10.45% per year and its five-year earnings growth rate has averaged 28% or more annually, Connell added.

“EPS growth rate is expected to increase exponentially more than 100% this year,” Connell commented. “That’s well ahead of the industry average expected growth rate of 22%.”

The company is a “strong cash generator” and initiated a dividend when it reported results on May 8. Connell told me. While the dividend yield for NSSC is just 0.78%, it is a start, Connell counseled.

Three Technology Investments to Buy: Beware of Regulation

The Biden administration’s regulatory reach into artificial intelligence innovation drew concerned comments from Richard Vigilante, a senior analyst of Gilder’s Technology Report, a monthly investment newsletter featuring technology futurist George Gilder. Subscribers are kept abreast of what Gilder and his senior analysts describe as top AI stocks.

George Gilder discusses the latest AI stocks in his trading services.

“What strikes me most is the breadth and generality of the order and the lack of evidence that the government knows what it is doing,” Vigilante opined. “What it says is sufficiently predictable that it could be a Chat GPT document, which does not encourage confidence in the analysis behind the order.”

Particularly mischievous are the non-discrimination provisions, Vigilante cautioned. As often is the case with the Biden administration, “disparate outcomes” are interpreted as evidence of discrimination, leading to an outbreak of lawsuits, he added.

Also scary is that AI could be a great tool for screening out potential frauds, bad actors, destructive tenants and more, but not if users are threatened with criminal prosecution for protecting themselves, Vigilante warned.

Similarly worrisome is mention of sentencing, parole and probation. AI could introduce some objectivity into these murky areas, but the likelihood of disparate outcomes could derail that effort, Vigilante counseled.

Three Technology Investments to Buy: Political Risk Rises

Russia’s invasion of Ukraine remains a big worry, as well as the outbreak of war in the Middle East following the brual sneak attack of Hamas inside Israel. To help fund its sustained invasion of Ukraine, Russia has committed to limiting production of oil to keep prices up. OPEC leader Saudi Arabia also has curtailed production to help draw down global inventories.

Political risk could rise further after the Russian Defense Ministry released documents recently indicting its military spending could rise by more than 68% in 2024 to reach $111.15 billion. That amounts to about 6% of Russia’s gross domestic product (GDP), more than the country’s spending on social programs, according to Moscow Times. Russia’s military spending is set to total about three times more than education, environmental protection and health care spending combined.

The three technology investments to buy can be purchased at reduced prices following their recent pullbacks. Investors need to be able to accept rising political risk as wars rage.

Paul Dykewicz, www.pauldykewicz.com, is an award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.

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You can strike gold and silver investment opportunities at Costco

Costco (NDAQ:COST), known for its wide array of products, also offers a distinct opportunity for investors: gold and silver.
The post You can strike gold…

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March 18, 2024

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Costco known for its wide array of products ranging from groceries to electronics and sporting goods, also offers a distinct opportunity for investors: precious metals Costco began selling 1-ounce 24-karat gold bars, in the United States in October 2023 and sold more than US$100 million by November Investors are looking for inflation-proof opportunities and as Stockhouse’s recent Thematic Insights report details, the gold supply has remained essentially flat over time, so it is never diluted Costco Wholesale Corp. stock last traded at US$725.63 on the NASDAQ and C$34.01 per share on the NEO Exchange

With gold prices hovering around all-time highs, one of the top warehouse retailers and Canada’s favourite grocer has brought the precious metal to its consumers.

Costco (NDAQ:COST), known for its wide array of products ranging from groceries to electronics and sporting goods, also offers a distinct opportunity for investors: precious metals. While the retail giant might not be the first place that comes to mind when thinking about gold and silver investments, Costco’s offerings in Canada have caught the attention of savvy investors looking to diversify their portfolios.

Let’s delve into what Costco Canada has to offer in terms of gold and silver investments and explore the potential benefits and considerations.

Gold and silver bullion at Costco

Costco began selling 1-ounce 24-karat gold bars, in the United States in October 2023 priced around US$2,000 and sold more than US$100 million by November.

Observing Costco shoppers can provide interesting economic and cultural indicators. Just like the early days of COVID-19 in 2020 when consumers emptied pallets of toilet paper, the supplies of gold and silver at Costco might reveal how confident the public is in Canadian currency and the economy.

Costco Canada stocks a selection of gold and silver bullion available online at Costco.ca, providing investors with the opportunity to add physical precious metals to their investment portfolios. Gold and silver bullion are typically offered in the form of bars or coins, each carrying intrinsic value based on the metal content.

(Source: Costco.ca) Benefits of investing in gold and silver Portfolio diversification: Gold and silver have historically served as a hedge against inflation and economic uncertainty. By adding precious metals to their portfolios, investors can diversify risk and potentially protect their wealth during times of market volatility. Tangible assets: Unlike stocks or bonds, which exist only as digital entries or paper certificates, gold and silver bullion offer investors tangible assets they can hold in their hands. This physical presence can provide a sense of security and stability, especially during turbulent economic times. Liquidity: Gold and silver are globally recognized as valuable commodities, making them liquid assets. Investors can easily buy and sell gold and silver bullion in various markets around the world, providing flexibility and accessibility. Store of value: Throughout history, gold and silver have maintained their value over the long term. While fiat currencies may depreciate because of factors such as inflation, political instability or economic crises, precious metals have proven to retain their purchasing power over time. Considerations when investing in precious metals Price volatility: Like any investment, the prices of gold and silver can fluctuate based on supply and demand dynamics, geopolitical events, and macroeconomic factors. Investors should be prepared for price volatility and hold a long-term perspective. Storage and security: Owning physical precious metals requires adequate storage and security measures to protect against theft or damage. Investors might opt for secure vault storage services or invest in home safes to safeguard their bullion. Transaction costs: When buying and selling gold and silver bullion, investors might incur transaction costs such as premiums, commissions or storage fees. It’s essential to factor these expenses into investment decisions to accurately assess potential returns. Costco also marks up its precious metals at a few hundred dollars above its market value, but you will likely find it slightly cheaper than what the big Canadian banks offer, if their stock isn’t sold out. Market timing: Timing the market is notoriously difficult, and attempting to predict short-term price movements in gold and silver can be challenging. Instead, focus on the long-term fundamentals and consider dollar-cost averaging as a strategy to mitigate market timing risk. Why buy gold and silver at Costco?

Already up more than 5 per cent since the beginning of the year, the value of gold is expected to continue to climb this year. Earlier this month it hit record highs above $2,181/oz. as speculation rises around the prospects of June interest rate cuts.

… but is it a good investment?

In an interview with CBC Radio’s The Current, Will Huggins, an associate professor of finance and economics at McMaster University’s DeGroote School of Business called this a good marketing strategy by Costco, but believed that buying gold from Costco doesn’t offer any advantage compared with the big Canadian banks.

“It’s not like a herd of cattle or some land or a corporate entity that we can keep bringing new people into,” he said. “It’s just a yellow rock.”

(Source: Costco Wholesale Corp.) Final thoughts on buying gold and silver

Costco Canada’s offering of gold and silver bullion presents an intriguing opportunity for investors seeking to diversify their portfolios with tangible assets.

Investors are looking for inflation-proof opportunities and as Stockhouse’s recent Thematic Insights report details, the gold supply has remained essentially flat over time, so it is never diluted and is essentially immune to inflation.

Whether you’re a seasoned investor looking to bolster your portfolio’s resilience or a newcomer exploring alternative investment avenues, the availability of gold and silver bullion at Costco Canada may offer a convenient and accessible option to incorporate precious metals into your investment strategy.

While investing in precious metals carries certain benefits and considerations, it is important for investors to conduct due diligence, assess their risk tolerance, and consult with financial professionals before making investment decisions. As with any investment, prudent decision-making and a long-term perspective are key to navigating the complexities of the financial markets.

Costco Wholesale Corp. (NDAQ:COST) stock last traded at US$725.63 on the NASDAQ and C$34.01 per share on the NEO Exchange.

Join the discussion: Find out what everybody’s saying about this stock on the Costco Wholesale Corp. Bullboard, and check out the rest of Stockhouse’s stock forums and message boards.

The material provided in this article is for information only and should not be treated as investment advice. For full disclaimer information, please click here.

The post You can strike gold and silver investment opportunities at Costco appeared first on The Market Online Canada.

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Supreme Court Rules Public Officials May Block Their Constituents On Social Media

Supreme Court Rules Public Officials May Block Their Constituents On Social Media

Authored by Matthew Vadum via The Epoch Times (emphasis…

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March 17, 2024

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Supreme Court Rules Public Officials May Block Their Constituents On Social Media

Authored by Matthew Vadum via The Epoch Times (emphasis ours),

Public officials may block people on social media in certain situations, the Supreme Court ruled unanimously on March 15.

People leave the U.S. Supreme Court in Washington on Feb. 21, 2024. (Kevin Dietsch/Getty Images)

At the same time, the court held that public officials who post about topics pertaining to their work on their personal social media accounts are acting on behalf of the government. But such officials can be found liable for violating the First Amendment only when they have been properly authorized by the government to communicate on its behalf.

The case is important because nowadays public officials routinely reach out to voters through social media on the same pages where they discuss personal matters unrelated to government business.

“When a government official posts about job-related topics on social media, it can be difficult to tell whether the speech is official or private,” Justice Amy Coney Barrett wrote for the nation’s highest court.

The case is separate from but brings to mind a lawsuit that several individuals previously filed against former President Donald Trump after he blocked them from accessing his social media account on Twitter, which was later renamed X. The Supreme Court dismissed that case, Biden v. Knight First Amendment Institute, in April 2021 as moot because President Trump had already left office.

At the time of the ruling, the then-Twitter had banned President Trump. When Elon Musk took over the company he reversed that policy.

The new decision in Lindke v. Freed was written by Justice Amy Coney Barrett.

Respondent James Freed, the city manager of Port Huron, Michigan, used a public Facebook account to communicate with his constituents. Petitioner Kevin Lindke, a resident of Port Huron, criticized the municipality’s response to the COVID-19 pandemic, including accusations of hypocrisy by local officials.

Mr. Freed blocked Mr. Lindke and others and removed their comments, according to Mr. Lindke’s petition.

The U.S. Court of Appeals for the 6th Circuit ruled for Mr. Freed, finding that he was acting only in a personal capacity and that his activities did not constitute governmental action.

Mr. Freed’s attorney, Victoria Ferres, said during oral arguments before the Supreme Court on Oct. 31, 2023, that her client didn’t give up his rights when using social media.

“This country’s 21 million government employees should have the right to talk publicly about their jobs on personal social media accounts like their private-sector counterparts.”

The position advocated by the other side would unfairly punish government officials, and “will result in uncertainty and self-censorship for this country’s government employees despite this Court repeatedly finding that government employees do not lose their rights merely by virtue of public employment,” she said.

In Lindke v. Freed, the Supreme Court found that a public official who prevents a person from comments on the official’s social media pages engages in governmental action under Section 1983 only if the official had “actual authority” to speak on the government’s behalf on a specific matter and if the official claimed to exercise that authority when speaking in the relevant social media posts.

Section 1983 refers to Title 42, U.S. Code, Section 1983, which allows people to sue government actors for deprivation of civil rights.

Justice Barrett wrote that according to the so-called state action doctrine, the test for “actual authority” must be “rooted in written law or longstanding custom to speak for the State.”

“That authority must extend to speech of the sort that caused the alleged rights deprivation. If the plaintiff cannot make this threshold showing of authority, he cannot establish state action.”

“For social-media activity to constitute state action, an official must not only have state authority—he must also purport to use it,” the justice continued.

“State officials have a choice about the capacity in which they choose to speak.”

Citing previous precedent, Justice Barrett wrote that generally a public employee claiming to speak on behalf of the government acts with state authority when he speaks “in his official capacity or” when he uses his speech to carry out “his responsibilities pursuant to state law.”

“If the public employee does not use his speech in furtherance of his official responsibilities, he is speaking in his own voice.”

The Supreme Court remanded the case to the 6th Circuit with instructions to vacate its judgment and ordered it to conduct “further proceedings consistent with this opinion.”

Also on March 15, the Supreme Court ruled on O’Connor-Ratcliff v. Garnier, a related case. The court’s sparse, unanimous opinion was unsigned.

Petitioners Michelle O’Connor-Ratcliff and T.J. Zane were two elected members of the Poway Unified School District Board of Trustees in California who used their personal Facebook and Twitter accounts to communicate with the public.

Respondents Christopher Garnier and Kimberly Garnier, parents of local students, “spammed Petitioners’ posts and tweets with repetitive comments and replies” so the school board members blocked the respondents from the accounts, according to the petition filed by Ms. O’Connor-Ratcliff and Mr. Zane.

But the Garniers said they were acting in good faith.

“The Garniers left comments exposing financial mismanagement by the former superintendent as well as incidents of racism,” the couple said in a brief.

The U.S. Court of Appeals for the 9th Circuit found in favor of the Garniers, holding that elected officials using social media accounts were participating in a public forum.

The Supreme Court ruled in a three-page opinion that because the 9th Circuit deviated from the standard the high court articulated in Lindke v. Freed, the 9th Circuit’s decision must be vacated.

The case was remanded to the 9th Circuit “for further proceedings consistent with our opinion” in the Lindke case, the Supreme Court stated.

Tyler Durden Sun, 03/17/2024 - 22:10

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Home buyers must now navigate higher mortgage rates and prices

Rates under 4% came and went during the Covid pandemic, but home prices soared. Here’s what buyers and sellers face as the housing season ramps up.

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March 17, 2024

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Springtime is spreading across the country. You can see it as daffodil, camellia, tulip and other blossoms start to emerge. 

You can also see it in the increasing number of for sale signs popping up in front of homes, along with the painting, gardening and general sprucing up as buyers get ready to sell. 

Which leads to two questions: 

  • How is the real estate market this spring? 
  • Where are mortgage rates? 

What buyers and sellers face

The housing market is bedeviled with supply shortages, high prices and slow sales.

Mortgage rates are still high and may limit what a buyer can offer and a seller can expect.  

Related: Analyst warns that a TikTok ban could lead to major trouble for Apple, Big Tech

And there's a factor not expected that may affect the sales process. Fixed commission rates on home sales are going away in July.

Reports this week and in a week will make the situation clearer for buyers and sellers. 

The reports are:

  • Housing starts from the U.S. Commerce Department due Tuesday. The consensus estimate is for a seasonally adjusted rate of about 1.4 million homes. These would include apartments, both rentals and condominiums. 
  • Existing home sales, due Thursday from the National Association of Realtors. The consensus estimate is for a seasonally adjusted sales rate of about 4 million homes. In 2023, some 4.1 million homes were sold, the worst sales rate since 1995. 
  • New-home sales and prices, due Monday from the Commerce Department. Analysts are expecting a sales rate of 661,000 homes (including condos), up 1.5% from a year ago.

Here is what buyers and sellers need to know about the situation. 

Mortgage rates will stay above 5% 

That's what most analysts believe. Right now, the rate on a 30-year mortgage is between 6.7% and 7%. 

Rates peaked at 8% in October after the Federal Reserve signaled it was done raising interest rates.

The Freddie Mac Primary Mortgage Market Survey of March 14 was at 6.74%. 

Freddie Mac buys mortgages from lenders and sells securities to investors. The effect is to replenish lenders' cash levels to make more loans. 

A hotter-than-expected Producer Price Index released that day has pushed quotes to 7% or higher, according to data from Mortgage News Daily, which tracks mortgage markets.

Home buyers must navigate higher mortgage rates and prices this spring.

TheStreet

On a median-priced home (price: $380,000) and a 20% down payment, that means a principal and interest rate payment of $2,022. The payment  does not include taxes and insurance.

Last fall when the 30-year rate hit 8%, the payment would have been $2,230. 

In 2021, the average rate was 2.96%, which translated into a payment of $1,275. 

Short of a depression, that's a rate that won't happen in most of our lifetimes. 

Most economists believe current rates will fall to around 6.3% by the end of the year, maybe lower, depending on how many times the Federal Reserve cuts rates this year. 

If 6%, the payment on our median-priced home is $1,823.

But under 5%, absent a nasty recession, fuhgettaboutit.

Supply will be tight, keeping prices up

Two factors are affecting the supply of homes for sale in just about every market.

First: Homeowners who had been able to land a mortgage at 2.96% are very reluctant to sell because they would then have to find a home they could afford with, probably, a higher-cost mortgage.

More economic news:

Second, the combination of high prices and high mortgage rates are freezing out thousands of potential buyers, especially those looking for homes in lower price ranges.

Indeed, The Wall Street Journal noted that online brokerage Redfin said only about 20% of homes for sale in February were affordable for the typical household.

And here mortgage rates can play one last nasty trick. If rates fall, that means a buyer can afford to pay more. Sellers and their real-estate agents know this too, and may ask for a higher price. 

Covid's last laugh: An inflation surge

Mortgage rates jumped to 8% or higher because since 2022 the Federal Reserve has been fighting to knock inflation down to 2% a year. Raising interest rates was the ammunition to battle rising prices.

In June 2022, the consumer price index was 9.1% higher than a year earlier. 

The causes of the worst inflation since the 1970s were: 

  • Covid-19 pandemic, which caused the global economy to shut down in 2020. When Covid ebbed and people got back to living their lives, getting global supply chains back to normal operation proved difficult. 
  • Oil prices jumped to record levels because of the recovery from the pandemic recovery and Russia's invasion of Ukraine.

What the changes in commissions means

The long-standing practice of paying real-estate agents will be retired this summer, after the National Association of Realtors settled a long and bitter legal fight.

No longer will the seller necessarily pay 6% of the sale price to split between buyer and seller agents.

Both sellers and buyers will have to negotiate separately the services agents have charged for 100 years or more. These include pre-screening properties, writing sales contracts, and the like. The change will continue a trend of adding costs and complications to the process of buying or selling a home.

Already, interest rates are a complication. In addition, homeowners insurance has become very pricey, especially in communities vulnerable to hurricanes, tornadoes, and forest fires. Florida homeowners have seen premiums jump more than 102% in the last three years. A policy now costs three times more than the national average.

Related: Veteran fund manager picks favorite stocks for 2024

 

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