US housing latest and impact for Aussie investors
The US housing market has been slowing for a while. Ever since interest rates started increasing, the pace of building activity has declined. In recent months, the decline has accelerated.
Not necessarily prices falling, just less activity. I first wrote about the freeze in US housing construction in early 2023. This week, one of the world’s largest construction material companies, James Hardie (an Aussie success story) came out with worse than expected earnings. Hardies earns most of its money in the US, and it cited slower than expected US building volumes.
At the same time, Warren Buffett, one of the world’s most watched investors, is slowly buying up builders and material companies. He probably thinks the US Federal Reserve will continue cutting rates, which will encourage building and construction activity.
I discuss this in my podcast this week, below the audio.
That’s where the real story lies for me. The US is likely to continue cutting rates because the housing construction is weak. The data is showing us activity is slowing. The best investor in the world is indirectly telling us he expects a turnaround. That all means rate cuts in the US.
The US needs to stimulate building activity, and the only way to do that is with lower interest rates. The housing market is the business cycle in the US.
Rate cuts overseas will mean rate cuts everywhere else, including Australia. Depending on how deep US cuts are, that could also mean a stronger Australian dollar, with more money flowing here as the US dollar trade winds back.
Good news for Aussie investors in 2026. Real estate prices are likely to continue rising the mining and materials could cushion any pullback on banking and financial stocks, balancing things out. Go Australia!