Big Debt Energy, Housing Market Locked, and SPACs

U.S. household debt was on the rise, reflecting both the growth in the economy and the ongoing impact of the COVID-19 pandemic. According to data from the Federal Reserve Bank of New York, total U.S. household debt reached a new high of $14.96 trillion in the second quarter of 2021, an increase of $313 billion from the first quarter of the year. Mortgage balances, the most significant component of household debt, stood at $10.44 trillion, an increase of $282 billion from the first quarter. Student loan debt was approximately $1.57 trillion, while auto loan debt was $1.37 trillion. Credit card balances increased by $17 billion to $770 billion.

The U.S. housing market is experiencing a slowdown with shrinking inventory due to homeowners holding onto their properties to capitalize on low-interest rates, causing a decrease in sales velocity. Despite a slight drop in housing prices, homeowners choose to stay in their homes longer, with the average tenure increasing from 6.5 years in 2005 to 12 years. New home sales account for approximately 10% of the U.S. housing market. While these are subject to fluctuations, the median price of new houses sold was higher than the previous year, suggesting that demand may still be strong despite the slowing sales pace.

The SPAC market has declined significantly, with de-SPAC performance dropping 63.3% since 2018 and fewer SPAC IPOs and de-SPAC mergers in 2022 compared to 2021 due to increased regulatory scrutiny and rising interest rates. Electric vehicle startup Lordstown Motors, which went public via a SPAC merger in 2020, recently filed for bankruptcy and accused Taiwan's Foxconn of fraudulent conduct and not fulfilling investment agreements, representing further troubles in the E.V. industry. This trend points to increased risk and volatility for consumers investing in companies that go public via SPACs, especially in the EV sector.

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