The US housing market has settled into an unusual state that is leaving nearly everyone dissatisfied at once — buyers priced out, sellers reluctant to list, and renters facing tight supply — a dynamic that economists trace back to a structural shortage compounded by a generation of baby boomers who are neither selling nor downsizing at the pace prior housing cycles would predict.

A Market Where No One Is Winning

The current housing environment defies the usual buyer’s-market-versus-seller’s-market framing. According to reporting from NPR’s Business Story of the Day, the US housing market is “pretty weird right now,” with unresolved questions dominating the conversation for buyers, sellers, and renters alike: how the country ended up with a persistent housing shortage, whether housing remains a good investment at current prices, and what policy levers might unlock the substantial housing inventory currently held by baby boomers who are ageing in place rather than downsizing.

Redfin’s chief economist Daryl Fairweather has been a central voice in unpacking the dynamic, according to the same NPR coverage, pointing to a market where elevated mortgage rates have discouraged existing homeowners from selling and trading up — the so-called “lock-in effect” — even as new household formation continues to outpace new construction in many metro areas.

The Boomer Inventory Question

Central to the current impasse is a demographic puzzle: a large cohort of baby boomers occupies housing stock that would, under historical patterns, typically be turning over to younger buyers by now. Instead, many are remaining in place — whether due to strong attachment to low pre-pandemic-era mortgage rates, limited appealing downsizing options, or simply ageing in communities they have lived in for decades. The result is a persistent supply constraint that policy discussions have increasingly focused on unlocking, though consensus on the right mix of incentives — tax policy, zoning reform, or targeted senior-housing development — remains elusive.

Why This Matters for the Broader Economy

Housing affordability sits at the intersection of several major economic storylines currently playing out in Washington. It factors directly into the inflation data the Federal Reserve is weighing at its July policy meeting under new Chair Kevin Warsh, given shelter costs’ outsized weight in core CPI calculations. It also intersects with household debt management: financial experts continue to recommend building emergency savings and prioritising credit card payments specifically to avoid the “hamster wheel of debt” that can result when unexpected housing-related costs — a broken furnace, a rent increase, a failed home sale — collide with tight monthly budgets, according to the same NPR reporting.

A Market Increasingly Segmented by Region and Income

The “weirdness” of the current market is not uniform. Some regions continue to see meaningful price appreciation and tight inventory, while others — particularly in parts of the Sun Belt that saw rapid pandemic-era construction — have seen prices soften as new supply catches up with demand. That regional divergence complicates any single national narrative about whether housing remains “a good investment,” a question that increasingly depends on which metro area, price tier, and time horizon a buyer is evaluating.

What to Watch

The Federal Reserve’s rate decisions through the remainder of 2026 will remain the single biggest lever affecting mortgage affordability, while any legislative movement on zoning reform or incentives targeting boomer-held inventory could meaningfully reshape supply dynamics over a multi-year horizon. In the meantime, the market’s current equilibrium — unsatisfying for nearly every participant — appears likely to persist without a clear near-term catalyst for change.

Asia Pacific travellers have a 50% higher intention to increase travel spending than those in Europe and the US, cementing the region’s position as the world’s growth engine for travel. According to one study, 88% of global travellers plan to increase or maintain their travel budgets in 2026.

China’s outbound market is the powerhouse. China’s outbound travel in 2026 is projected to exceed 225 million trips, surpassing pre-pandemic levels and marking a transition from recovery to a structurally different phase of growth. Chinese travellers report the highest expected mean spend at **$7,748 per international leisure trip**, followed by Australian travellers at $7,124 and Indian travellers at $5,154. International visitor spending in China rose by 10.5% to $135 billion, exceeding pre-pandemic levels and outperforming the global average growth of 3.2%.

The World Travel and Tourism Council expects China’s travel and tourism sector to grow 7% annually over the next decade, contributing $3.8 trillion to GDP by 2035. China is on track to surpass the US as the world’s leading travel and tourism economy.

Corporate travel is also booming. Business travel expenditure across Asia Pacific is forecast to reach $70.09 billion in 2026, marking a year-on-year increase of 10.9%. The region is expected to contribute more than 40% of total global outbound business travel spending, underlining APAC’s central role in international commerce and aviation growth. China alone is projected to account for $40.8 billion of this spending — 58% of the regional total.

What’s driving this surge? Expanding visa-free access, a stronger yuan, and pent-up demand from Chinese consumers eager to explore the world. MMGY’s survey of 4,000 travellers shows that Chinese and Indian travellers are planning 3.2-3.5 trips annually versus 1.9-2.3 for Australia, Japan, and South Korea. The destinations winning Chinese travellers are those offering premium experiences, seamless digital payments, culturally resonant offerings, and visa facilitation.

The spending differential is significant. Chinese travellers not only travel more frequently but spend substantially more per trip than travellers from other major Asia Pacific markets. This makes them the most coveted segment for destinations worldwide, driving intense competition among tourism boards to attract and retain Chinese visitors through targeted marketing, direct flights, and culturally tailored experiences.

The dominant narrative around artificial intelligence investment has always centred on equity valuations — Nvidia’s market capitalisation, hyperscaler earnings multiples, the concentration of the S&P 500 in a handful of AI-exposed names. That narrative is now incomplete. The more consequential shift underway in 2026 is happening in credit markets, and regulators are starting to say so explicitly.

An Unprecedented Pace of Capital Deployment

The Bank of England’s July 2026 Financial Stability Report puts it plainly: the pace of AI-related investment is unprecedented historically, with AI companies increasingly turning to the financial system — and specifically to debt financing — to fund infrastructure buildouts. This marks a meaningful departure from the equity-heavy funding model that characterised the first wave of the AI boom, when cash-rich technology giants largely self-funded expansion from balance-sheet reserves.

Why Debt, and Why Now

The shift toward debt financing reflects simple scale economics: data-center construction costs have grown large enough that even the best-capitalised technology companies are choosing to preserve equity and cash flexibility by tapping bond and private credit markets instead. This dynamic accelerated sharply through the first half of 2026, coinciding with the same window in which China’s export data showed chips, computer parts and power equipment accounting for roughly half of the country’s export growth — evidence that the AI infrastructure buildout is now a genuinely global capital-expenditure cycle, not a US-only phenomenon.

The Leverage Concentration Problem

The Bank’s Financial Policy Committee has flagged a specific structural fragility: equity gains in AI-related names have been driven in significant part by a narrow, concentrated set of companies, with a substantial increase in the use of leverage tied to these positions. That combination — narrow concentration plus rising leverage — is precisely the mechanism that has historically turned isolated valuation corrections into broader, self-reinforcing liquidity events.

Separately, the Bank’s broader assessment of credit markets warns that vulnerabilities in risky asset valuations, sovereign debt markets and risky credit segments — including private credit specifically — remain, with some having become more pronounced since its previous report, as globally higher interest rates and energy-driven cost increases add pressure on corporate borrowers across the board, AI-related or otherwise.

The Sovereign Debt Connection

Perhaps the most significant — and least discussed — finding from the Bank’s analysis concerns how an AI-related equity correction could interact with sovereign bond markets. In its modelled scenario, debt-to-GDP ratios rise following a hypothetical AI valuation correction, but the Bank notes that both the US Treasury market and UK gilt market continued to function well under the scenario tested — with an explicit warning that had those markets come under pressure instead, the consequences could have been considerably more severe.

That finding sits uncomfortably alongside the Federal Reserve’s own hawkish pivot under Chair Kevin Warsh, detailed elsewhere in this series. A Fed moving toward rate hikes rather than cuts directly raises the cost of the debt financing now underpinning much of the AI infrastructure buildout — a tightening that could pressure highly leveraged data-center financing structures at precisely the moment the sector’s borrowing needs are accelerating.

What Regulators Are Doing About It

Rather than attempting to directly restrain AI-related credit growth — not typically a central bank mandate — the Bank of England is focused on strengthening the plumbing that would need to absorb a shock if one occurs. It points specifically to reforms already announced for money market funds across the UK and Europe, alongside exploratory changes to bolster resilience in the gilt repo market, as the primary tools available to prevent an AI-financing-driven credit event from cascading into broader market dysfunction.

The Investor Takeaway

For fixed-income investors and credit allocators, the practical shift is this: AI exposure can no longer be assessed purely through equity valuation multiples. The debt structures financing data-center buildouts — their leverage ratios, their sensitivity to a hawkish Fed, and their concentration among a narrow set of borrowers — now represent a distinct and growing risk factor in global credit markets, one that central banks on both sides of the Atlantic are actively modelling, even as they stop short of calling it a bubble outright.

Featured Snippet

Is AI infrastructure being funded by debt or equity in 2026? AI companies are increasingly relying on debt financing rather than equity to fund data-center buildouts, a shift the Bank of England describes as historically unprecedented in pace, raising new financial stability questions around leverage concentration and credit market resilience.