| I’m Cécile Daurat, an economics editor in the US. Today we’re looking at Ann Choi, Mark Niquette, Michael Sasso, and Alexandre Tanzi’s report on housing affordability. Send us feedback and tips to ecodaily@bloomberg.net or get in touch on X via @economics. And if you aren’t yet signed up to receive this newsletter, you can do so here. - The world economy’s fault lines shift from inflation to politics and debt.
- China cut its benchmark lending rates after the central bank eased policy.
- Once you try a four-day workweek, it’s hard to go back.
The crisis of housing affordability spawned or accelerated by the pandemic has been well-chronicled around the world, from Europe to the UK and Australia. In the US, it’s coming to a head two weeks before the presidential election. Bloomberg visited three places in the country where the housing crunch is particularly acute based on measures including debt-to-income ratios and for-sale inventory: Las Vegas, suburbs of Philadelphia and Atlanta. The three metro areas all happen to be in the seven battleground states expected to decide the outcome of the Nov. 5 election.
What the reporters found are middle-class families, people with an education and decently paying jobs, who are struggling to afford a house without financial help. You can read more from their story here. Housing affordability, which is hovering near record lows in the country, is a top voting issue for younger generations in particular. According to Fannie Mae calculations, it would take one of three things, or a combination of them, for it to return to 2016-2019 levels: - The median price of a single-family home would need to fall 38%
- The median household income would have to rise more than 60%
- Or the mortgage rate would need to drop to 2.35% from about 6.5%
A house is the quintessential stepping stone to achieving the “American Dream.” But it isn’t the only one. Higher education is key to build financial security overtime, and costs have skyrocketed too. This year, a median American household can expect to pay 75% of its annual income to put one single child through a private college and more than a third of its income if their kid goes to a public in-state university. That’s up sharply from the time when their parents went to college themselves. For more on that story, see here. - It’s getting harder to climb the development ladder as robots and China make it tough for new export powerhouses to emerge. And tariffs will only make it worse.
- Rachel Reeves’ first challenge when it comes to delivering a delicately balanced UK budget later this month is winning over an increasingly mutinous Labour Party.
- France’s credit rating got another upgrade, while Italy’s got an unexpected boost.
- South Korea’s early trade data showed growth in exports slowed so far this month.
- Olaf Scholz’s government faces a balancing act: Germany needs more workers but anti-migrant sentiment is rising.
- Former general Prabowo Subianto was sworn in as Indonesia’s president. Sri Mulyani Indrawati will stay on as finance minister in a sign of policy continuity.
- Saudi Arabia is preparing to begin construction work on its next giga-project: a cube-shaped skyscraper big enough to fit 20 Empire State Buildings.
Even before global finance chiefs fly into Washington over the next few days, they’ve been urged in advance by the International Monetary Fund to tighten their belts. Two weeks ahead of a potentially era-defining US election, and with the world’s recent inflation crisis barely behind it, ministers and central bankers face intensifying calls to get their fiscal houses in order while they still can. Elsewhere in the coming week, a rate cut in Canada and a hike in Russia are among the possible central bank moves anticipated by economists. See here for the rest of the week’s economic events. The housing component of the US consumer price index, the largest by far, has remained stubbornly sticky. That’s in part because rent gauges are notoriously lagging in the index: It takes someone to move or renew their lease to reflect changes that are captured in real-time measures of rents for new tenants. A new Cleveland Fed simulation model attempts to capture that gap, using input from renter mobility data, rents paid by new tenants, and a rate at which changes in new-tenant rents pass through to continuing-tenant ones.  Source: Federal Reserve Bank of Cleveland The simulation suggests that rent inflation may not return to its pre-pandemic levels until mid-2026, assuming other key variables hold steady. | 
