3Fourteen's Warren Pies take on the market

 

I'll be honest. I keep hearing from people that a rate cut will "produce a soft landing" and that real estate prices will start to increase rapidly again. 

NOPE. 

Inventory is starting to rise and homes aren't selling. Will rate cuts help? Sure. Will they save this market? Zero chance unless inventory goes back down. We sure seem to have short memories as a society in that rates were hanging around 2-4% for 10-20 years YEARS, and yet we think that a small cut to say 6% is going to save the market? No chance. Simply put, nearly everyone that can afford to buy a home has bought one. Distressed markets continue to bubble and while I am seemingly a one man island right now, I don't see a big upside for real estate at all. In fact, I think the 'soft landing' is based purely on hope......... We shall see. 

4 month sales losing stretch broken according to CNBC

 

The Headline: "Existing home sales broke a 4 month losing stretch rising 1.3%/ month". 

That said, the ONLY THING THAT MATTERS HERE IS SUPPLY IS RISING. 

1.33 M homes for sale at end of month....up 18% Year over year. 

Weitz Take: What's it all mean? I suppose the 'jury is still out', but if you read this blog routinely, you know SUPPLY IS EVERYTHING in my opinion. 

With high supply comes more likely price drops if properties are not sold. I will reaffirm my previous statement that we are at or very near the top of this market cycle and it could get very ugly. 

The next 3-6 months will be very interesting. If rates aren't cut, I think we start to see major cracks in the market especially if inventory continues to rise. 

Enjoy the end of summer as we start what will surely be an interesting Fall on many levels not the least of which is the most emotional Presidential election I think our generation has ever seen. 

Government preliminary bench mark jobs off as much as 1 MILLION?!

The BLS jobs report off as much as 1 Million this year. No biggie...just 1 Million of a labor market that is approximately 167 Million people in total. 

See ARTICLE here. 

Goldman Sachs and Wells Fargo economists expect the government's preliminary benchmark provisions on Wednesday to show payroll growth was at least 600,000 weaker than currently estimated. Goldman Sachs indicates it could be as large as a million jobs that were overestimated. There are a number of caveats in the preliminary figure, but a downward revision to employment of more than 500,001 would be the largest in 15 years and suggest the labor market has been cooling for longer than originally thought. The final numbers are due early next year.

WEITZ: 

1) We seriously can't get accurate payroll numbers for an entire year?!

2) Up to 1 Milllion off?!

3) What's the point of even tracking this if the numbers are wildly off?!

Here's an article on the makeup of the BLS jobs report and its incomptence of being a notable indicator on the economy. 

Sorry- I don't buy this. Its either corrupt or incompetent. Zero in between. With the technology we have today, this is totally inexcusable considering its used as an important factor in the Fed determining interest rates. Rates have remained high because things have been 'good' yet we are only A MILLION JOB OFF..... I'm so very tired of this crap. Can you imagine if the private sector was off by this much for something substantial. Everyone involved would lose their job. It's completely absurd. 

The slow-motion economic train wreck continues on its course......

Goldman Sachs says 'recession' now unlikely

 

Goldman Sachs Chief Economist interviewed about recession possibilities: His rationale is based on the following "Better Data”: 

a.      Retail Sales up 0.3%

b.     Decline in Jobless claims

c.      Earnings reports from Q2 – positive commentary on the consumer

WEITZ- This is so aggravating. Goldman Sachs is treated as the bellwether of the economic world and even these ‘best and brightest’ have trouble in avoiding reactionary thought rather than predictive thought.

According to Attom, July foreclosure data are up 15% from a month ago and that's with no real depreciation in RE as of yet.

U.S. Foreclosure Activity Sees a Monthly Increase in July 2024 (attomdata.com)

 ….and that’s the tip of the iceberg. As I’ve outlined for months, CRE defaults are ‘off the charts’, interest rates remain unsustainably high, and inventory is increasing in the residential market(s) generally. I simply refuse to believe that we can skirt by all of these macro factors without significant market weakens - I don’t see a path out of this where a recession can be avoided, and I’d suggest it may even become a late 2007-2009 situation (or worse depending on governmental reaction or lack thereof).

Perhaps I'll be the one with 'egg on my face', but I don't see this aging well for Goldman Sachs and their spot as 'top dogs' on Wall Street... although, let's be frank, the accountability on Wall Street has been virtually non-existent since the late 2000 crisis. 

Yahoo - "Jobs Report stokes fears the Fed may have waited too long"

 See latest from the AP today; Markets down big on Job Report

Jobs Report leads to sell off

Some of the most pertinent excerpts below:  

* The US economy added fewer than expected jobs last month with softer wage gains underscoring concerns that the Fed Reserve reluctance to lower interest rates is choking off growth prospects. 

* BLS (Bureau of Labor Statistics) said that a net 114,000 new jobs were created in July.

* "Job gains have dropped below the 150,000 threshold that would be considered consistent with a solid economy". 

* Data on Thursday showed weekly jobless claims jumped to the highest levels in nearly a year with around 250,000 Americans filing for unemployment benefits. 

* "The trends in inflation were heading in the right direction but the softening labor market never seemed to get the focus when discussing their dual mandate". 

WEITZ: Welcome to reality everyone. This is just the beginning. The monetary expansion / money printing/ lending during COVID and under Biden was completely unsustainable. Now we must face a downward period to reach somewhat of a reasonable equilibrium and I don't see that being pretty. With inflation, many are being squeezed and attempting to pass it along in higher prices which will lead to less demand and a negative cycle that will be tough to get out. Buckle Up. I fully expect to see mortgage delinquencies rise by year's end, if not sooner. That's the next shoe to drop beyond weak jobs reports and increased layoffs in my opinion. 

Side note: Intel just came out today and said they were reducing 15% of their workforce. When the large tech companies are feeling the squeeze, it's certainly worth noting.