🏠 Bad news for house-hunters

What’s going on here?

Nike's fourth-quarter earnings suggested the firm’s getting its mojo back.

What does this mean?

Nike’s had a rocky year or so dealing with unsold inventory, sky-high shipping costs, and sluggish Chinese sales. But things are looking up now: while the firm’s still wrestling with leftover stock and stubborn costs under the surface, strong sales growth is pulling it along. With a solid 5% increase overall, a 16% jump in China, and a 15% leap in its vital direct-to-consumer sector, it looks like Nike’s brand is still fit as a fiddle. So while the slightly lower-than-expected forecasts might have some investors faltering, Nike’s got a clear message: inventory and cost headaches are temporary hiccups, but strong sales are here to stay.

Why should I care?

Zooming in: Direct dimes.

Nike's been sprinting away from its wholesale buddies for a while now, and making a beeline for customers online and in its own stores instead. So far, that strategy has swollen direct-to-consumer sales to more than half of Nike's total pie – and with 15% growth in direct sales last quarter, that slice only seems set to grow. And that’s a good thing: see, cutting out the middleman means that Nike pockets more profit – a surefire way to fatten margins over time.

Zooming out: Don’t speak too soon.

In the post-earnings conference call, Nike's CEO declared that the Chinese consumer is back and ready to spend. But that might come as news to the country’s government. After all, years of lockdowns have shaken consumer confidence, and spending’s still in a slump. Plus, fresh data suggests that factory activity took a hit for the third straight month in June. But hey – maybe the mad dash for Air Jordans does mean the Chinese consumer's still got game.

What’s going on here?

UK house prices towered a little higher in June, according to data from Nationwide.

What does this mean?

The UK housing market is showing more backbone than folk gave it credit for. After all, the market has managed to hold its ground so far, despite gloomy predictions that skyrocketing mortgage rates would trigger a crash. And sure, there was a 3.5% dip in June compared to last year – but for one, that’s closer to a gentle slide than a catastrophic tumble. And for another, June’s prices still edged past the figures from this May.
Homeowners shouldn’t break out the champagne just yet, though. Lending rates are on the up and up – which could trigger a wave of forced sales, bringing house prices back to earth pretty swiftly.

Why should I care?

For you personally: Generation lottery.

Anyone who managed to hop onto the property ladder in the past decade has been surfing a sweet wave of low rates and booming property prices. And sure, generations before that might have grappled with sky-high borrowing rates, but their house prices were a steal. If you’re part of the younger generation, though, and you feel like you’ve drawn the short straw, hold on. These higher rates could nudge the UK into a recession, and that should lead to cheaper borrowing. In short, then, the best strategy might actually be some old-school Boomer advice: keep on saving and hoping, saving and hoping.

The bigger picture: Supply glut.

By the looks of it, there could be plenty of properties available before long. Data firm UK Finance thinks that about 2.4 million borrowers need to refinance their mortgages before the end of next year. And with current mortgage rates nearly quadrupling since their September 2021 low, borrowers could be facing a steep hike in interest payments when the due date rolls around. Only time will tell how many households overextended themselves – but it looks like the fallout might not be pretty.